Competition for Corporate Control: Institutional Investors, Investment Funds, and Hostile Takeovers in Japan

Schaede, Ulrike

The recession and banking crisis of the 1990s have triggered a complete reorientation in corporate strategy by large Japanese firms, away from the previous goal of diversification financed by bank loans, and towards market-financed concentration on select core businesses. The transition has necessitated corporate reorganization by almost all large firms, causing a wave of spin-off, mergers, and acquisitions. Extensive legal reforms have enabled this reorganization and introduced more stringent rules on accounting and disclosure. The confluence of these two events - access and transparency - has paved the way for a market for corporate control, fueled by institutional investors and investment funds, including foreigners, as major players. While the M&A boom of the early 21st century may partially be attributable to a window of economic opportunity, the systemic changes in Japan's financial markets are irreversible and therefore constitute a strategic inflection point. Contested corporate control has become an indelible part of Japanese finance and corporate governance.

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Academic Units
Center on Japanese Economy and Business
Center on Japanese Economy and Business, Graduate School of Business, Columbia University
Center on Japanese Economy and Business Working Papers, 248
Published Here
February 14, 2011