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Political Intervention, Corporate Governance and Firm Performance: An Empirical Investigation in Japan and Taiwan
Author(s) -
Hsin-Yi Yu,
Brian G. M. Main
Publication year - 2012
Publication title -
accounting and finance research
Language(s) - English
Resource type - Journals
eISSN - 1927-5994
pISSN - 1927-5986
DOI - 10.5430/afr.v1n1p134
Subject(s) - corporate governance , politics , business , principal–agent problem , order (exchange) , resource dependence theory , intervention (counseling) , accounting , agency (philosophy) , government (linguistics) , empirical research , economics , finance , management , political science , law , sociology , psychology , social science , linguistics , philosophy , epistemology , psychiatry

This paper investigates the interaction of government and financial institutions in the operation of a company through the relationship of the main bank system and the system of amakudari (appointing retired bureaucrats to the boards of public companies). Consistent with resource dependency theory, the empirical results suggest that governments and financial institutions tend to appoint representatives to the board in order to help troubled companies. However, a negative relationship is established between the presence of such amakudari and subsequent firm performance. Thus, while the system of amakudari may use its influence in an attempt to save troubled companies, it is possible that, as suggested by agency theory, the monitoring ability of the board may consequently be jeopardized to the detriment of overall firm performance.

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