Work

Unnatural selection of outside directors: Consequences of Japanese corporate governance reforms

Year: 2022

Type: article

Abstract: We examine how Japanese listed companies increase the number of outside directors to comply with corporate governance reforms. We find that, after the reforms, there has been an increase in the number of cases in which former company auditors (kansayaku) become outside directors in the same company. This trend is more pronounced for hitherto noncompliant firms with insufficient outside directors before the reforms. Moreover, the firms appointing company auditors as outside directors tend to change their corporate structures to maintain existing practices and minimize compliance costs. Our findings imply that Japanese reforms have increased the unnatural selection of outside directors.

Source: European Financial Management

DOI: 10.1111/eufm.12361

Authors: Souhei Ishida, Takuma Kochiyama

Institutions: Rikkyo University, Hitotsubashi University

Language: English

Topic: Corporate Finance and Governance

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDG: Peace, justice, and strong institutions

Open Access status: green

Funder: Japan Society for the Promotion of Science