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Japanese Corporate Governance and Macroeconomic Problems

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  • Randall Morck
  • Masao Nakamura

Abstract

Japan's prolonged economic problems are due to more than faulty macro-economic policies. We do not deny the importance of bungled macro-economic policy, but argue than deeper maladies in Japanese corporate governance made that country increasingly vulnerable to such problems. We argue that Japan's main bank and financial keiretsu systems left corporate governance largely in the hands of creditors rather than shareholders. thus, Japanese governance practices did not assign effective control rights to residual claimants. This, we argue led to a widespread misallocation of capital that mired Japan in excess capacity and liquidity problems.

Suggested Citation

  • Randall Morck & Masao Nakamura, 2000. "Japanese Corporate Governance and Macroeconomic Problems," Harvard Institute of Economic Research Working Papers 1893, Harvard - Institute of Economic Research.
  • Handle: RePEc:fth:harver:1893
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Steven Ongena & David C. Smith & Dag Michalsen, 2000. "Firms and their distressed banks: lessons from the Norwegian banking crisis (1988-1991)," International Finance Discussion Papers 686, Board of Governors of the Federal Reserve System (U.S.).
    2. Panayotis Kapopoulos & Sophia Lazaretou, 2009. "Does corporate ownership structure matter for economic growth? A cross-country analysis," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 30(3), pages 155-172.
    3. Smith, David C., 2003. "Loans to Japanese borrowers," Journal of the Japanese and International Economies, Elsevier, vol. 17(3), pages 283-304, September.
    4. Higgins, Huong N., 2013. "Conflicts of interest between banks and firms: Evidence from Japanese mergers," Pacific-Basin Finance Journal, Elsevier, vol. 24(C), pages 156-178.
    5. Benjamin Hunt & Douglas Laxton, 2004. "The Zero Interest Rate Floor (ZIF) and its Implications for Monetary Policy in Japan," National Institute Economic Review, National Institute of Economic and Social Research, vol. 187(1), pages 76-92, January.
    6. Yener Altunbaş & Alper Kara & Adrian van Rixtel, 2007. "Corporate governance and corporate ownership: The investment behaviour of Japanese institutional investors," Occasional Papers 0703, Banco de España;Occasional Papers Homepage.
    7. David C. Smith, 2003. "Loans to Japanese borrowers," International Finance Discussion Papers 769, Board of Governors of the Federal Reserve System (U.S.).
    8. Ongena, Steven & Smith, David C. & Michalsen, Dag, 2003. "Firms and their distressed banks: lessons from the Norwegian banking crisis," Journal of Financial Economics, Elsevier, vol. 67(1), pages 81-112, January.
    9. Sohn, Wook, 2010. "Market response to bank relationships: Evidence from Korean bank reform," Journal of Banking & Finance, Elsevier, vol. 34(9), pages 2042-2055, September.
    10. John Armour & B.R. Cheffins & D.A. Skeel Jr., 2002. "Corporate Ownership Structure and the Evolution of Bankruptcy Law in the US and UK," Working Papers wp226, Centre for Business Research, University of Cambridge.

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