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Effects of outside directors on firms’ investments and performance: Evidence from a quasi-natural experiment in Japan

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  • Morikawa, Masayuki

Abstract

This study presents evidence on the impact of outside directors on firms’ investment behavior and performance with a focus on the recent quasi-natural experiment that rapidly increased the number of outside directors in listed firms. Using a panel of Japanese firms, we compare listed and unlisted firms and conduct instrumental variable estimations to examine causal relationships. The results indicate that the rapid increase in the number of outside directors among listed firms did not promote active investments or risk-taking behavior. In addition, it had no significant impacts on the profitability and productivity of the firms.

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  • Morikawa, Masayuki, 2020. "Effects of outside directors on firms’ investments and performance: Evidence from a quasi-natural experiment in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 56(C).
    • Handle: RePEc:eee:jjieco:v:56:y:2020:i:c:s0889158320300113
    DOI: 10.1016/j.jjie.2020.101074
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    More about this item

    Keywords

    Outside director; Corporate governance; Investment; R&D; ROA; TFP;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law

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