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Political Intervention, Corporate Governance and Firm Performance: An Empirical Investigation in Japan and Taiwan

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    Rights statement: © Main, B., & Yu, H-Y. (2012). Political Intervention, Corporate Governance and Firm Performance: An Empirical Investigation in Japan and Taiwan. International Journal of Finance and Economics, 1(1), 134-151. 10.5430/afr.v1n1p134

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Original languageEnglish
Pages (from-to)134-151
Number of pages18
JournalInternational Journal of Finance and Economics
Volume1
Issue number1
DOIs
Publication statusPublished - 2012

Abstract

This paper investigates the interaction of government and financial institutions in the operation of a company through the relationship of the main bank system and the system of amakudari (appointing retired bureaucrats to the boards of public companies). Consistent with resource dependency theory, the empirical results suggest that governments and financial institutions tend to appoint representatives to the board in order to help troubled companies. However, a negative relationship is established between the presence of such amakudari and subsequent firm performance. Thus, while the system of amakudari may use its influence in an attempt to save troubled companies, it is possible that, contrary to resource dependency theory but consistent with agency theory, the monitoring ability of the board may consequently be jeopardized to the detriment of overall firm performance.

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