A Frog in a Well Knows Nothing of the Ocean: A History of Corporate Ownership in Japan
- 1 January 2010
- preprint
- Published by Elsevier BV in SSRN Electronic Journal
Abstract
Japan’s corporate sector has, over the past century, been reorganized according to every major corporate governance model. Prior to World War II, wealth Japanese families locked in their control over large corporations by organizing them into pyramidal groups, called zaibatsu, similar to structures currently found in Canada, France, Korea, Italy, and Sweden. In the 1930s, the military government imposed a centrally planned command economy, with private property rights retained as little more than a legal fiction. The American occupation force replaced this with a widely held corporate sector similar to that of the United Kingdom and United States. A bout of takeovers and greenmail ensued. To defend their positions, Japanese top executives placed small numerous blocks of stock with each other’s firms, creating dense networks of small intercorporate blocks that summed to majority blocks in each firm. These networks, called keiretsu, halted hostile takeovers completely. Although their primary functions were to lock in corporate control rights, both zaibatsu and keiretsu were probably also rational responses to a variety of institutional failings. Successful zaibatsu and keiretsu were enthusiastic political rentseekers, raising the possibility that large corporate groups are better at influencing government than free standing firms. In the case of keiretsu especially, this rent seeking probably retarded financial development and created long-term economic problems.This publication has 64 references indexed in Scilit:
- The Multinational Enterprise as an Economic OrganizationPublished by Cambridge University Press (CUP) ,2007
- Information and the market's perceptions of Japanese bank risk: Regulation, environment, and disclosurePacific-Basin Finance Journal, 2002
- Ferreting out Tunneling: An Application to Indian Business GroupsThe Quarterly Journal of Economics, 2002
- The Colonial Origins of Comparative Development: An Empirical InvestigationThe American Economic Review, 2001
- Can Relationship Banking Survive Competition?The Journal of Finance, 2000
- Growth, Economies of Scale, and Targeting in Japan (1955-1990)The Review of Economics and Statistics, 1996
- Monitoring Characteristics of the Main Bank System: An Analytical and Developmental ViewPublished by Oxford University Press (OUP) ,1995
- Private benefits from control of public corporationsJournal of Financial Economics, 1989
- Information, Incentives and Bargaining in the Japanese EconomyPublished by Cambridge University Press (CUP) ,1988
- Industrial Organization in Japan.Administrative Science Quarterly, 1978