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The Myth of the Main Bank: Japan and Comparative Corporate Governance

Author

Listed:
  • Yoshiro Miwa

    (Faculty of Economics, University of Tokyo)

  • J. Mark Ramseyer

    (Harvard Law School)

Abstract

In this essay on Masahiko Aoki's recent study of Japanese corporate governance, we argue that he and others misdescribe Japan on several fundamental dimensions. First, Japanese firms and employees choose neither to arrange implicit life-time employment contracts nor to invest heavily in firm-specific skills. Instead, firms keep employees employed during economic downturns only because interventionist courts do not let them lay their employees off. Second, Japanese firms do not organize themselves into keiretsu corporate groups, do not exchange shares with other alleged group members, and do not necessarily use the money-center bank attributed to the group as their "main bank." Last, Japanese "main banks" neither agree in advance to rescue troubled debtors nor monitor firms on behalf of other creditors.

Suggested Citation

  • Yoshiro Miwa & J. Mark Ramseyer, 2001. "The Myth of the Main Bank: Japan and Comparative Corporate Governance," CIRJE F-Series CIRJE-F-131, CIRJE, Faculty of Economics, University of Tokyo.
  • Handle: RePEc:tky:fseres:2001cf131
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    File URL: http://www.cirje.e.u-tokyo.ac.jp/research/dp/2001/2001cf131.pdf
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    References listed on IDEAS

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    Cited by:

    1. Chiou, Ingyu & White, Lawrence J., 2005. "Measuring the value of strategic alliances in the wake of a financial implosion: Evidence from Japan's financial services sector," Journal of Banking & Finance, Elsevier, vol. 29(10), pages 2455-2473, October.
    2. Yamada, Ken, 2004. "Fact or Fable? Misunderstanding or Misspecification? Keiretsu, the Main-Bank System, and the Japanese Economy," Journal of Asian Economics, Elsevier, vol. 15(5), pages 999-1004, October.
    3. Joe Peek & Eric S. Rosengren, 2005. "Unnatural Selection: Perverse Incentives and the Misallocation of Credit in Japan," American Economic Review, American Economic Association, vol. 95(4), pages 1144-1166, September.
    4. Yishay Yafeh, 2002. "An International Perspective of Japan's Corporate Groups and their Prospects," NBER Working Papers 9386, National Bureau of Economic Research, Inc.

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