Governance Structures and Management Efficiency in Japanese Companies

This study uses panel data from companies from FY 2001 to 2004 to analyze the effects of banks, share owning, and directors on the management efficiency of companies, with consideration given to the attributes of managers, the presence of labor unions, and the existence of an education and training system. The results showed that the impacts of bank dependence and labor unions on management efficiency differ depending on the origins and attributes of the managers. We confirm that Japanese companies that have high dependence on banks and weak pressure from the capital markets, with labor unions in place and managers that are promoted internally within the company-in other words typical Japanese-style companies-tend to have lower management efficiency as compared with Japanese companies that do not share these attributes. Underlying all this is the difficulty involved in making employment adjustments in non-founder-managed companies, particularly in companies where managers are promoted internally.