A Study On Japanese Corporate Governance Reform Since 1990s

Japan has become the second largest economic power within 30 years, and a long list of big Japanese companies with international competitiveness have grasped big shares in world market, all those achievements justify the effectiveness of Japanese corporate governance. Japan's economic system is apparently different from others. "Cross-shareholding", "lifetime employment", "insider management", "main bank system" and other practices exist in Japanese corporate governance. All those unique practices make Japan's economy praised as "Japanese miracle" during the Japan high growth period; "Japanese style management", and "Japan economic system" were thought to be the mysterious sources of Japan's economy and companies. But, since the burst of 1990's economic bubble, Japan companies were treated as the products of government escort policy with no competitiveness.The big change of the understanding about Japanese economy and companies does show that Japanese economic system, especially Japan corporate governance need careful examination. This paper uses comparative institutional analysis approach to analyze the Japanese corporate governance. At the beginning, traditional Japanese corporate governance is examined, and it is found that shareholding structure, financial regulation and employment practices affect the Japanese corporate governance deeply. Japan's traditional governance, characterized as insiders domination, and contingent governance by main bank, is an "equilibrium". There exists strong complementarities among Japan's institutions, regulations and practices, and just these complimentary institutions make the Japan corporate governance so different from others, but also very effective. However, institution establishment does changes: financial deregulation, cross-shareholding unbundling, bank-company relationship changing, and the world-wide popular of corporate governance; the fundamentals of the traditional Japan's corporate governancehave changed, the existing "equilibrium" is not compatible with the new situation and effectiveness degenerates. In this condition, all stakeholders react to the changes rationally, thus corporate governance undergoes reform. This paper scrutinizes the reform, analyzing the interrelationship among all mechanism changes, and articulates the impacts the reform has on the core elements of the traditional corporate governance, "main bank system" and "lifetime employment". This paper also analyses several issues which cause hot debate in Japan, and rationale of different stakeholders are explained. The understanding about core issues will determine the course of the Japanese corporate governance reform.Finally, this thesis describes the prospect of the reform. With the research achievement, with the specific institutions of China in consideration, some advice on how to improve Chinese corporate governance is given.