Contents:
Part 1: Financial Institutions and Financial Markets in Japan and East Asia
1. Can the Financial Restraint Theory Explain the Postwar Experience of Japan's Financial System? Masaharu Hanazaki and Akiyoshi Horiuchi
2. The Role of Long-term Funds for Economic Development: Empirical Evidence in Japan, Korea, and Taiwan Shin-ichi Fukuda
3. Japanese Economic Success and the Curious Characteristics of Japanese Stock Prices Randall Morck and Bernard Yeung
4. Japanese Securities Firms, Business Corporations, and Financial Institutions: A Comparison of their Investing Behavior Kenneth A. Kim and John R. Nofsinger
5. Financial Deregulations, Weakness of Market Discipline, and Market Development: Japan's Experience Mitsuhiro Fukao
6. Macroeconomic Effects of Capital Adequacy Regulation in Japan Heather Montgomery
Part 2: Issues in Governance of Corporate Sector and New Technology
7. The Financing and Governance of New Technologies Colin Mayer
8. The Benefits and Costs of Internal Markets: Evidence from Asia's Financial Crisis Stijn Claessens, Simeon Djankov, Joseph P.H.Fan, and Larry H.P.Lang
9. Large Shareholders and Banks: Who Monitors and How? Yishay Yafeh and Oved Yosha
10. Did Families Lose or Gain Control after the East Asian Financial Crisis? Anya Khanthavit, Piruna Polsiri, and Yupana Wiwattanakantang
11. The Determinants of Executive Compensation in Japan and the UK: Agency Hypothesis or Joint Determination Hypothesis? Katsuyuki Kubo
Part 3: Toward a New Design of Financial System
12. Towards an Incentive Compatible Financial System: Accounting and Managing the Non-Performing Loans Akio Kuroda and Koichi Hamada
13. Further Reforms of the JGB Market for the Promotion of Regional Bond Markets S. Ghon Rhee
14. Reflections on New Financial System in Japan: Participation Costs, Wealth Distribution, and Security Market-Based Intermediation Yukinobu Kitamura, Megumi Suto, and Juro Teranishi

This book carefully examines the effects of changes in the corporate governance structure on corporate behavior or company performance, using micro-data from listed companies in Japan. The author found that in Japan the introduction of stock options had neither a positive impact on profitability nor the negative side effects of promoting risk-taking behaviors. Furthermore, he found that corporate diversification and division of corporations showed negative impacts on profitability. The corporate governance structure of Japan has exhibited a large change from the second half of the 1990s to the present. There have been institutional reforms involving enterprise law, such as the introduction of stock options and the removal of the ban on holding companies. With respect to the ownership structure of a company, discernible trends are that the equity holdings of financial institutions and business corporations have fallen while the presence of foreign stockholders has risen. These trends are often pointed out as signs that the Japanese corporate governance structure has been approaching the American model and that this will energize Japanese firms. The author contradicts common academic theories, however, and concludes that the formation of the corporate governance which emphasizes the agency problem between shareholders and corporate managers is inadequate. He suggests that an institutional arrangement for a corporate governance system that values a variety of stakeholders' interests is greatly needed and concludes that perspectives on maximizing surplus values for various stakeholders and distributing the surpluses appropriately among the stakeholders will become increasingly important for the purpose of managing corporations.