NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

'Outside' Intervention in Japanese Companies: Its Determinants and Implications for Mangers

Steven Kaplan, Bernadette Minton

NBER Working Paper No. 4276 (Also Reprint No. r1914)
Issued in February 1993
NBER Program(s):   CF

This paper estimates the determinants of appointments of 'outsiders' -- directors previously employed by banks or other non-financial firms -- to the boards of large (non-financial) Japanese companies. Appointments of both types of 'outsiders' increase with poor stock performance; those of bank outsiders also increase with negative current income. Appointments of bank outsiders are related to firm debt levels; those of corporate outsiders, to shareholder concentration and group affiliation, Both types of outsider appointments appear to be disciplinary -- top executive turnover increase substantially in the same year. Additional evidence on subsequent firm performance suggests that "bank" directors are appointed in financially distressed or contracting firms, while "corporate" directors are appointed in firms with temporary problems.

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Document Object Identifier (DOI): 10.3386/w4276

Published: "Appointments of Outsiders to Japanese Boards: Determinants and Implications for Managers" in Journal of Financial Economics, Vol. 36, No. 2 (October 1994), pp. 225-258.

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