BANK MONITORING, FIRM PERFORMANCE, AND TOP MANAGEMENT TURNOVER IN JAPAN

Abstract

An inverse relation between performance and managerial turnover at Japanese firms suggests that bank monitoring substitutes for other governance mechanisms (Kaplan, 1994; Kang & Shivdasani, 1995). Morck and Nakamura (1999), however, report that Japanese banks protect their self-interests as creditors rather than the interests of shareholders when appointing corporate directors. We re-examine data on top management changes at Japanese firms and find results consistent with this latter notion. Specifically, management turnover is conditionally related to a firm’s ability to meet its short-term obligations rather than profitability or stock returns. Bank monitoring is therefore not a substitute for mechanisms that directly serve shareholders’ interests.

Citation

Anderson, C.W., Campbell, T.L., Jayaraman, N. and Mandelker, G.N. (2003), "BANK MONITORING, FIRM PERFORMANCE, AND TOP MANAGEMENT TURNOVER IN JAPAN", Advances in Financial Economics (Advances in Financial Economics, Vol. 8), Emerald Group Publishing Limited, Leeds, pp. 1-27. https://doi.org/10.1016/S1569-3732(03)08001-0