Issues in Japanese Corporate Governance

Drysdale, Peter 한국비교경제학회 2004 비교경제연구 Vol.11 No.1

This paper reviews the current state of Japanese corporate governance and takes a look at the potential changes expected in the future. There have been many changes in the policy and regulatory environment that shapes corporate governance in Japan. The origin of these changes goes back to the first phase of financial liberalisation in the 1980s. The `big bang' financial refoinis initiated in the 1990s are yet to be completed but the changes in the relationship between the Japanese banking sector and the corporate sector have been profound. A new regime of corporate governance and financing is emerging from this change. Change is piecemeal. It is constrained by the complexity of nested institutions that are resistant and difficult to change. One way of describing the system that is emerging is that it is a hybrid system in which many of the institutional features of the bank-centred insider-oriented system of the postwar corporate governance regime in Japan will remain. But that description undervalues the longer-term impact of the changes. The new system is already more market oriented. The idea that a more market oriented shareholder-based corporate governance system is not compatible with Japanese institutional legacies in Japan does not square with history and the significant part played by stock issuance on the interwar period. The myriad of changes in the financial system and corporate regulation that have been set in train are leading to new corporate governance arrangements that are much more market- oriented than they were in the past. A key factor in this change is the opening up of the Japanese financial market and the more active role of foreign investors in Japan. More FDI in Japan is one aspect. Another aspect is the increased access of independent and entrepreneurial companies in Japan directly to international fund raising and to global centres of venture capital formation while domestic markets still remain embryonic. In short, while the process is slow and messy, the trends are clear. The proportion of household assets held in the form of bank deposits will decline and the role of securities investment and trusts will rise. Institutional investors and their role in corporate governance will become more critical. Companies will increase reliance on direct financing in the capital market. The main banks will aim to move to universal banking and smaller banks to carve out niche markets. The role of the banks in corporate governance will further recede and shareholders can be expected to increase their influence. There is a necessary convergence of corporate regulation in the global capital market if not yet of corporate practice. Unique equilibrium is not in the character of dynamic market adjustment in the real world. There will be little difference between the financing activities and corporate practice of major Japanese companies and their North American or European counterparts. Already the shift to a market-oriented system is well under way.

China-Australia Economic Cooperation and the Belt and Road Initiative (BRI)

Peter Drysdale,Dong Dong Zhang 한국APEC학회 2018 Journal of APEC Studies Vol.10 No.1

China’s Belt and Road Initiative (BRI) relates to the overarching agenda for cooperation between Australia and China based on their shared interest in an open global economic system, and reforms that promote the effectiveness of participation in the international market. These interests should guide the approach to regional and global cooperation. The BRI offers a framework for deepening cooperation through a process of open regionalism that promotes policy cooperation on economic issues of importance to both countries; the exploration of priorities for investment to enhance connectivity; trade and direct investment; the deepening of financial links; and the expansion of person-to-person exchanges. Both governments should invest in the deepening of the relationship within the framework of their Comprehensive Strategic Partnership by establishing an Australia-China (Ao-Zhong) Commission to promote high level policy research and scientific and cultural exchanges between the two countries. Additionally, they need to follow through on an ACJER recommendation that the Chinese and Australian governments upgrade cooperation on the BRI by establishing a dedicated high-level joint working group under the Comprehensive Strategic Partnership. To promote trade and investment connectivity, the landmark ChAFTA agreement should be implemented, and its investment chapter should be used to put into place a new bilateral investment agreement to benefit both countries. Deepening financial integration will benefit from dialogues and work between the two governments to understand the challenges China faces in opening its capital account to make its economy more flexible and its resource allocation more efficient while managing associated financial risks to its domestic economy. It is important to invest in person-to-person bonds and the social capital needed to support the development and management of a higher level relationship through the Australia-China Commission proposal. Deep mutual understanding and working closely together on policy developments through such exchanges will help manage risks and achieve the full potential of the relationship.

Issues in Japanese Corporate Governance

Peter Drysdale 한국비교경제학회 2004 비교경제연구 Vol.11 No.1

아시아와 새로운 세계 질서

Peter Drysdale,Shiro Armstrong 제주평화연구원 2011 JPI Peace Net Vol.2011 No.22

Issues in Japanese Corporate Governance 1

Peter Drysdale 한국경제연구원 2003 한국경제연구원 세미나자료 Vol.3 No.1

Issues in Japanese Corporate Governance 2

Peter Drysdale 한국경제연구원 2003 한국경제연구원 세미나자료 Vol.3 No.1

Ownership Structure of Northeast Asian Countries

Seung Rok Park,Peter Drysdale,Shin Il Kang,In kie Hong 한국경제연구원 2004 한국경제연구원 연구보고서 Vol.2004-02 No.-

1 In the first paper “Determinants of Corporate Ownership Structure and their effects on Corporate Governance in South Korea” by Shin-Il Kang, Korea’s unique characteristics, specifically the ownership structure and corporate governance are examined. The author takes a broad perspective by incorporating corporate culture, business leadership, and ownership structure in Korean corporation. Furthermore, he discusses the substitutability of Korean specific features given the rapidly changing economic environment. Under the Korea’s Chaebol structure, controlling shareholders, who are the real owner of firms, have exercised ownership rights while having a large proportion of shares aided by cross shareholdings. This has been possible through the pyramid ownership control structure as well as cross-shareholding among subsidiaries. Market circumstances related to management costs are not favorable to the firm with a dispersed ownership structure. In Korea, that’s the reason why ownership is concentrated. Given such a structure, the owners minimize costs related to management’s risks. Furthermore it proposes that leadership(firm culture) and ownership are substitutes. Concentrated ownership is needed when the leadership is not mature like Korean Chaebol. 2 The second paper “Issues in Japanese Corporate Governance” by Peter Drysdale examines some of the major issues of Japanese corporate governance today. The role of that main bank in corporate governance and inter corporate shareholding has been well documented. Although Japanese banks have rigorously monitored firms and have had an enormous influence on firms’ decisions and strategies through the owning of shares, firm performance under such a main bank system has not always been positive. Opposing views and their rationale regarding the pessimism behind the performance of firms in the main bank system are also explained in this paper. 3 The paper “Corporate Governance in China” by In Kie Hong discusses the current status and the restructuring efforts of China’s corporate governance. In China, state shareholders possess strong control rights over listed companies allowing them to exercise control even beyond their proportion of shareholding. Various governmental organizations(under the Communist Party) acting as representatives of the state as shareholders have influenced firms enormously, particularly regarding matters of organizing the board of directors as well as electing management. However since they have little incentives to manage state(national) assets and have insufficient capacity to monitor a large number of firms of which they are in charge, the principal-agent problem tends to prevail, which adds to the difficulties in preserving the value of state assets as well. 4 The last paper “Ownership Concentration and Corporate Performances in the Northeast Asian Countries” by Seung-Rok Park compares the relationship between corporate governance structure and corporate performance in Korea, Japan, and China by empirically examining the accounting corporate performances and technical efficiency measures. In the case of Korea, ownership concentration was shown to have positively affected all corporate accounting performance variables such as profit margin, return on shareholders’ funds, return on total assets, and return on capital employed. Furthermore, it was also found that ownership concentration positively affected corporate performance by helping improve the technical efficiency of firms. Unlike Korea, in Japan, there was no sign of a positive effect of ownership concentration on the accounting corporate performance and technical efficiency. Moreover, in the case of China, ownership concentration positively affected profit margin and return on total assets, while no positive effects of ownership concentration were found on return on capital employed and return on shareholders’ funds. It is shown in this study that the difference in the rel

The Economic Cooperation Potential of East Asia’s RCEP Agreement

Shiro Armstrong,Peter Drysdale 대외경제정책연구원 2022 East Asian Economic Review Vol.26 No.1

East Asia’s Regional Comprehensive Economic Partnership (RCEP) came into force in 2022 as the world’s largest free trade agreement. RCEP was concluded, signed and brought into force in the face of major international uncertainty and is a significant boost to the global trading system. RCEP brings Australia, China, Japan, South Korea and New Zealand into the same agreement with the ten member ASEAN group at its centre. It keeps markets open and updates trade and investment rules in East Asia, a major centre of global economic activity, at a time of rising protectionism when the WTO itself is under threat. The agreement builds on ASEAN’s free trade agreements and strengthens ASEAN centrality. One of the pillars of RCEP is an economic cooperation agenda which has its antecedents in ASEAN’s approach to bringing along its least developed members and builds on the experience of capacity building in APEC and technical cooperation under the ASEAN Australia-New Zealand Free Trade Agreement. There is an opportunity to create a framework that facilitates deeper economic cooperation that involves experience-sharing, extending RCEP’s rules and membership at the same time as strengthening political cooperation. The paper suggests some areas that might be best suited to cooperation — that is confidence and trust building instead of or before negotiation — and discusses how non-members may be engaged and the membership expanded. Options such as multilateralising provisions and becoming a platform for policy convergence and coordinating unilateral reforms are canvassed.