Do Japanese CEOs Matter?

In a country where individualism is not valued, we ask whether the CEO (shacho) of a Japanese corporation affects corporate behavior. To answer this question, we construct a shacho-firm matched panel data set in the period 1990 through 2002 of all listed 1,419 Japanese manufacturing firms and their 3,520 shachos. We utilize three distinct empirical methodologies to detect a shacho effect. First, we attempt to separate a firm-fixed effect from a shacho-fixed effect. We are unable to disentangle a shacho-fixed effect. Second, we examine whether the year of or the year after a shacho change was a turning point in the firm's 1990 to 2002 history of performance and policies. Our answer is generally no, even when the shacho change is non-routine. Third, we employ a classic event study to check whether the market thinks a shacho change is value-relevant. We do find a significant positive price response on the day a shacho change is announced, especially when the shacho change is non-routine. We are thus left to conclude that shachos do not matter in the Japanese corporation in this decade of a stagnant economy, though the market remains optimistic.