A clash of capitalisms: Foreign shareholders and corporate restructuring in 1990s Japan

Ahmadjian, Christina L.

This paper examines the conflict between stakeholder- and market-based business systems that resulted from an increase in foreign portfolio investment in the Japanese economy in the 1990's. As foreign institutions, which were more interested in investment returns than in long-term relationships, replaced domestic shareholders, one of the fundamental pillars of Japan's stakeholder capitalism began to crack, and Japanese firms began to adopt practices more characteristic of Anglo-American market economies. In an analysis of 1626 listed Japanese firms between 1990 and 1997, we found that foreign shareholders increased a firm's propensity to downsize and divest assets. The effect of foreign shareholders was strongest among firms less integrated into the existing Japanese system-those with lower levels of shareholding by domestic corporations and financial institutions. There is little evidence that foreigners exerted pressure directly through shareholder activism. Rather, as firms' resource dependencies shifted from domestic to foreign capital, their behavior shifted accordingly.

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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, 203
Published Here
February 11, 2011