The Ownership of Japanese Corporations in the 20th

Transcript:The Ownership of Japanese Corporations in the 20th:
The Ownership of Japanese Corporations in the 20th Century Julian Franks London Business School, CEPR and ECGI Colin Mayer Saïd Business School, Oxford University, CEPR and ECGI Hideaki Miyajima Waseda University and RIETI Introduction Law & finance view that stock markets thrive with a strong system of Anglo Saxon legal protection. But pre-WW2, low levels of investor protection in UK & yet a thriving stock market. Franks, Mayer & Rossi (2009) attribute it to trust generating mechanisms such as local stock markets & local investors. For example, pre-1948 an equal price rule in mergers prevailed, despite no takeover rules. Japan provides a very different ownership setting normally characterized as an insider system with large holdings by banks and corporate cross holdings. 2 Japan: A Remarkable Laboratory For half of the 20th century Japan was an outsider system That half coincided with weak investor protection. In the middle, there was a structural change (early postwar reforms) which destroyed institutions and introduced strong investor protection. Newly designed outsider system was short-lived, replaced by insider system. Japan is unusual in that it switched from one ownership system to another. A remarkable laboratory for examining the evolution of the ownership of corporations. 3 The Purpose of the Paper Long run evolution of ownership in 20th century in Japan Collects individual company ownership data Examines the dispersion of ownership, composition of shareholders, equity financing Influence of law & institutions Contrast first & second half of century Page 4 Main Results Investor protection cannot explain results Japan had dispersed ownership throughout the 20th century but insider ownership dominated the second half of the century Pre war, trust mechanisms that encouraged outsider ownership. 1) Business coordinators in the 1900s 2) Zaibatsu HC (family business groups) in the 1930s Post war: the dissolution of family groups & the lack of institutional support to sustain outside ownership. The failure to establish institutions with reputational capital Institutional trust explains the evolution to insider ownership 5 Our Data Sets 6 Pre-WW2: 2 samples 1900-1937 based on largest 100 Cos in 1918 (N=50) & 1930 (N=29), alive in 1940. 1918 sample had to be incorporated pre-1907 (mainly textiles, food, light engineering) 1930 sample incorporated pre 1921 (more heavy engineering, shipbuilding, chemicals) No Zaibatsu in 1907, 21 out of 29 zaibatsu affiliated in 1930 sample Post WW2 sample: Largest 100 firms by assets in 1937 or 1955 (total 126). Concentration of Ownership: 1900-1937