The Impact of Changes in Ownership and Control on Performance of the Japanese Firm: Challenges to Agency Theory

125 words) This paper explores the effects of recent governance reforms and foreign ownership change on Japanese corporate performance. We attempt to show whether recent governance reforms are truly motivated by a new focus on improving shareholder returns, or reflect a response to institutional isomorphism. We tested the agency theory derived hypotheses and found that only the increase in foreign ownership change was strongly associated with ROA and stock return index (SRI), while outside director participation in strategic decision-making was associated with SRI. The most obvious explanation for these findings is that recent boardroom reforms represent a response to institutional isomorphism and are not driven by performance goals. This explanation provides support to the view that agency theory alone cannot explain the recent board reforms in Japan.