Changing Corporate Governance Arrangements and Presidential Turnovers (Japanese)

This paper examines the impact of changing corporate governance arrangements on presidential turnovers, taking the long panel data from 1990-2013. Selecting approximately 500 firms randomly from the first section of the Tokyo Stock Exchange (TSE), we estimate the standard model with a regression of presidential turnovers on performance and other variables as a corporate governance arrangement. First, we show the performance measures to which presidential turnover are sensitive have changed over time from the return on assets (ROA) (pre-interest payment profit) to the return on equity (ROE) and stock return. Second, we find that strong ties with the main bank continue to enhance the sensitivity of performance to presidential turnovers after the banking sector was reconstructed, although the number of firms with such strong main bank ties has diminished. Third, foreign institutional investors began to play a significant role. We also examine the channels of their influence, testing the effect of exit (vote with feet) and voice (block holding). Finally, we show that independent outsider directors are only influential if at least three outsider directors are appointed. Otherwise (less than two outside directors), it would mitigate the sensitivity of presidential turnovers on performance. This result is consistent to the window dressing understanding of the role of independent outside directors.