Changes in corporate governance and top executive turnover: The evidence from Japan

Hideaki Miyajima*, Ryo Ogawa, Takuji Saito

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

18 Citations (Scopus)


We examine the turnover of top executives in Japanese firms throughout the period 1990–2013. During this time, the presence of a main bank has been weakened, the ownership of institutional investors has rapidly increased, and independent outside directors have been introduced in many firms. We find that top executive turnover sensitivity to corporate performance has not changed despite skepticism on corporate governance of Japanese firms. On the other hand, there is a shift from return on assets (ROA) to return on equity (ROE) and stock returns as performance indicators that turnover is most sensitive to. We also examine possible sources of this change. We find that foreign institutional investors strengthen the turnover sensitivity to ROE after banking crisis when their shareholding has dramatically increased. This result allows us to interpret that they began to play a disciplinary role. In contrast, we do not find that independent outside directors have any significant effect of enhancing turnover sensitivity to ROE, unless a firm appointed independent outside directors more than three. While the scope of the main bank's authority has substantially contracted, strong ties with main banks increase turnover sensitivity in the more recent period, indicating that main banks continue to perform a certain role in disciplining management.

Original languageEnglish
Pages (from-to)17-31
Number of pages15
JournalJournal of The Japanese and International Economies
Publication statusPublished - 2018 Mar


  • Corporate governance
  • Independent outside directors
  • Institutional investors
  • Main bank
  • Top executive turnover

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics
  • Political Science and International Relations


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