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Financial Malaise and the Myth of the Misgoverned Firm

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  • Yoshiro Miwa

    (Faculty of Economics, University of Tokyo)

  • J. Mark Ramseyer

    (Harvard Law School)

Abstract

For nearly a decade now, the specter of financial malaise has haunted East Asia. It overwhelms the weaker economies. It imperils North America. Persistently, it refuses to retreat. Yet even as the specter teases entrepreneurs with insolvency, some observers suggest that responsibility might lie with the entrepreneurs themselves. Might not the source of the malaise lie in the very governance structures they created and maintain, particularly in the shareholding and board composition patterns they support? Might not its solution lie in legal reforms that would force them to remake those structures? To examine these questions, we consider the governance arrangements at the heart of the malaise: in corporate Japan. Theoretically, we find nothing to suggest that the source of the recession lies in issues of corporate governance, and nothing to suggest that the solution lies in corporate law reform. We then assemble data from the banking industry -- one of the sectors most badly struck by the financial crisis. Empirically, we find nothing to suggest that the contested governance structures explain the poor performance of the banks involved.

Suggested Citation

  • Yoshiro Miwa & J. Mark Ramseyer, 2001. "Financial Malaise and the Myth of the Misgoverned Firm," CIRJE F-Series CIRJE-F-137, CIRJE, Faculty of Economics, University of Tokyo.
  • Handle: RePEc:tky:fseres:2001cf137
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    1. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-1037, October.
    2. Richard R. Nelson, 1995. "Recent Evolutionary Theorizing about Economic Change," Journal of Economic Literature, American Economic Association, vol. 33(1), pages 48-90, March.
    3. Romer, Paul M, 1987. "Growth Based on Increasing Returns Due to Specialization," American Economic Review, American Economic Association, vol. 77(2), pages 56-62, May.
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