Outside directors and the Japanese board room: An in-depth study

Abstract

The purpose of this paper is to investigate the performance impact at the board level in the corporate governance of Japanese companies. We investigated the composition of outside directors and outside auditors for three years and found evidence, that a higher outside ratio leads to a better performance. As a second step, we cluster Japanese companies into three groups, companies without outside directors, companies which appointed outside directors and companies who apply to the "US-style system." Companies without outside directors every single year show the weakest performance and US-style Japanese companies the strongest what leads to the conclusion that Japanese companies might be better off having a high ratio of outside directors and outside auditors.