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Abstract
My dissertation research focuses on the effects of governance systems on strategy and performance among large Japanese firms. There are two distinctive sets of large Japanese firms which correspond to two different types of governance systems. First, there are large firms which are affiliated with keiretsu, industrial groups (keiretsu firms hereafter). These keiretsu firms have stable and cooperative relationships with shareholders and business partners. In contrast, there are large firms which are not affiliated with keiretsu (independent firms hereafter). These independent firms, unlike keiretsu firms, have a more arms-length type of relationship with shareholders and business partners. As such, independent firms are likely to have governance systems which are similar to US firms. In short, keiretsu firms have different governance systems from independent firms. My dissertation has examined how this governance systems difference affects firm strategy--product diversification, international diversification, and R&D investment--and performance--ROA, market share increases (sales growth after controlling industry membership), and Jensen's alpha.
The sample of this study was drawn from Worldscope Global data base. To be included, a firm had to be a manufacturing firm, its stock had to be traded in the first section of the Tokyo Stock Exchange, and its sales volume should exceed one billion dollars in 1993. The final sample comprised 310 firms. Data were obtained from various publications and databases, and regression analysis was conducted to test hypotheses.
Main findings are: Ownership concentration was a significant predictor of levels of product and international diversification for independent firms, not for keiretsu firms, which indicates that keiretsu firms are governed in a different fashion than independent firms.
Evidence was found that governance systems play dual roles: an antecedent to strategy and a moderator between strategy and performance. For instance, keiretsu affiliation not only determined levels of product diversification, but also moderated their relationships to ROA and market share increases.
There were negative interaction effects of ownership concentration and strategy variables on firm performance among keiretsu firms. These findings might indicate overgovernance among these firms.
