The Japanese Corporate Governance System and Firm Performance: Toward Sustainable Growth

Abstract

Sakai and Asaoka (2003) suggest that the solution to problems of governance and firm performance is not quite as simple as only shifting the system of governance from the Japanese type of corporate governance to Anglo-American. In addition, the Anglo-American type of corporate governance system has recently been heavily criticized. Considering the above, this study tries to find ways to exploit the strengths of Japanese-type governance, especially by focusing on firm employment. Using panel data for Fiscal Years 1979-2002, this paper examines whether the utilization of temporary/part-time workers has improved firm performance in subsequent years. Although many studies have been made on the effect of firm performance on employment adjustment behavior, not much seems to be known about the opposite channel, that is, the effect of employment adjustment on firm performance. Section 1 gives the introduction. Section 2 reviews previous research on corporate governance, principally concerning R&D and human capital. In Section 3, the datasets are explained while the models are presented in Section 4. The empirical results are discussed in Section 5. Concluding remarks are made in Section 7. 1