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Does the Japanese Governance System Enhance Shareholder Wealth? Evidence from the Stock-Price Effects of Top Management Turnover

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  • Kang, Jun-Koo
  • Shivdasani, Anil

Abstract

This article examines the stock-price effects of top management turnover announcements for 432 Japanese corporations from 1985 to 1990. We find that these announcements are associated with significantly positive abnormal returns. The returns are greater when turnover is forced than when turnover represents normal succession. The stock-price effects are also significantly positive when turnover is forced and the successor is appointed from outside the firm. We find that large shareholders play an important role during outside succession. This evidence suggests that the disciplinary decisions of Japanese governance mechanisms are consistent with shareholder wealth maximization. Article published by Oxford University Press on behalf of the Society for Financial Studies in its journal, The Review of Financial Studies.

Suggested Citation

  • Kang, Jun-Koo & Shivdasani, Anil, 1996. "Does the Japanese Governance System Enhance Shareholder Wealth? Evidence from the Stock-Price Effects of Top Management Turnover," The Review of Financial Studies, Society for Financial Studies, vol. 9(4), pages 1061-1095.
    • Handle: RePEc:oup:rfinst:v:9:y:1996:i:4:p:1061-95
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    Cited by:

    1. Yishay Yafeh & Oved Yosha, 2003. "Large Shareholders and Banks: Who Monitors and How?," Economic Journal, Royal Economic Society, vol. 113(484), pages 128-146, January.
    2. Heinrich, Ralph P., 1999. "Complementarities in Corporate Governance - A Survey of the Literature with Special Emphasis on Japan," Kiel Working Papers 947, Kiel Institute for the World Economy (IfW Kiel).
    3. Randall Morck & Masao Nakamura & Murray Frank, 2001. "Japanese Corporate Governance and Macroeconomic Problems," Palgrave Macmillan Books, in: Masao Nakamura (ed.), The Japanese Business and Economic System, chapter 12, pages 325-363, Palgrave Macmillan.
    4. Stefano d’Addona & Axel Kind, 2014. "Forced Manager Turnovers in English Soccer Leagues," Journal of Sports Economics, , vol. 15(2), pages 150-179, April.
    5. Frank Wiengarten & Chris K. Y. Lo & Jessie Y. K. Lam, 2017. "“How does Sustainability Leadership Affect Firm Performance? The Choices Associated with Appointing a Chief Officer of Corporate Social Responsibility”," Journal of Business Ethics, Springer, vol. 140(3), pages 477-493, February.
    6. Cools, Kees & Mirjam van Praag, C., 2007. "The value relevance of top executive departures: Evidence from the Netherlands," Journal of Corporate Finance, Elsevier, vol. 13(5), pages 721-742, December.
    7. Stefano D'Addona & Axel Kind, 2011. "Forced Manager Turnovers In English Soccer Leagues: A Long-Term Perspective," Working Papers 1011, CREI Università degli Studi Roma Tre, revised 2011.
    8. Kang, Jun-Koo & Shivdasani, Anil, 1997. "Corporate restructuring during performance declines in Japan," Journal of Financial Economics, Elsevier, vol. 46(1), pages 29-65, October.
    9. Pessarossi, Pierre & Weill, Laurent, 2013. "Does CEO turnover matter in China? Evidence from the stock market," Journal of Economics and Business, Elsevier, vol. 70(C), pages 27-42.
    10. Ahn, Sanghoon & Bhattacharya, Utpal & Jung, Taehun & Nam, Giseok, 2009. "Do Japanese CEOs matter?," Pacific-Basin Finance Journal, Elsevier, vol. 17(5), pages 628-650, November.
    11. (Jianqiu) Bai, John & Mkrtchyan, Anahit, 2023. "What do outside CEOs really do? Evidence from plant-level data," Journal of Financial Economics, Elsevier, vol. 147(1), pages 27-48.
    12. Mehrotra, Vikas & van Schaik, Dimitri & Spronk, Jaap & Steenbeek, Onno, 2011. "Creditor-Focused Corporate Governance: Evidence from Mergers and Acquisitions in Japan," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 46(4), pages 1051-1072, August.
    13. Kind, Axel & Schläpfer, Yves, 2011. "Are forced CEO turnovers good or bad news?," Working papers 2011/10, Faculty of Business and Economics - University of Basel.
    14. Miwa, Yoshiro & Ramseyer, J. Mark, 2006. "The Fable of the Keiretsu," University of Chicago Press Economics Books, University of Chicago Press, number 9780226532707, December.
    15. repec:zbw:bofitp:2012_021 is not listed on IDEAS
    16. Mai Dao & Hua-Wei Huang & Ken Y. Chen & Ting-Chiao Huang, 2014. "Can Management Turnover Restore the Financial Statement Credibility of Restating Firms? Further Evidence," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 41(7-8), pages 893-925, September.
    17. Pessarossi, Pierre & Weill, Laurent, 2013. "Does CEO turnover matter in China? Evidence from the stock market," Journal of Economics and Business, Elsevier, vol. 70(C), pages 27-42.
    18. Nera Marinda Machdar, 2019. "Does CEO Turnover Affect Stock Market Performance through Company Performance in Indonesian Companies?," International Journal of Applied Economics, Finance and Accounting, Online Academic Press, vol. 4(1), pages 15-21.
    19. Yener Altunbaş & Alper Kara & Adrian van Rixtel, 2007. "Corporate governance and corporate ownership: The investment behaviour of Japanese institutional investors," Occasional Papers 0703, Banco de España.
    20. Shubasini Sivapregasam & Aslam Izah Selamat & Norhuda Abdul Rahim & Junaina Muhammad, 2020. "Impact of Chief Executive Officer (CEO) Succession Policy on CEO Turnover Announcement in Malaysia," Asian Academy of Management Journal of Accounting and Finance (AAMJAF), Penerbit Universiti Sains Malaysia, vol. 16(1), pages 127-153.
    21. Kato, Hideaki Kiyoshi & Lemmon, Michael & Luo, Mi & Schallheim, James, 2005. "An empirical examination of the costs and benefits of executive stock options: Evidence from Japan," Journal of Financial Economics, Elsevier, vol. 78(2), pages 435-461, November.
    22. Takanori Tanaka, 2009. "Managerial Entrenchment, Banker Distribution, and Corporate Governance: Evidence from Japan," Discussion Papers in Economics and Business 09-02, Osaka University, Graduate School of Economics.
    23. Michael S. Gibson, 1998. "\"Big Bang\" deregulation and Japanese corporate governance: a survey of the issues," International Finance Discussion Papers 624, Board of Governors of the Federal Reserve System (U.S.).
    24. Akinobu Shuto & Norio Kitagawa & Naoki Futaesaku, 2017. "The Effect of Bank Monitoring on the Demand for Earnings Quality in Bond Contracts," IMES Discussion Paper Series 17-E-12, Institute for Monetary and Economic Studies, Bank of Japan.
    25. Hiroshi Uemura, 2018. "Effects of CEO Turnover and Board Composition Reform on Improvements in the Internal Control Quality," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 9(3), pages 36-52, July.

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