Corporate ownership, profitability, and bank-firm ties: Evidence from the American occupation Reforms in Japan

This paper uses data from a report submitted to General MacArthur in order to examine the effects of a large scale reform in corporate control in Japan following World War II. The analysis indicates that reformed firms tended to perform worse than their industry peers due to diffuse postreform ownership structure and limited monitoring of managers. Evidence on the reappearance of corporate groups in Japan a few years after the end of the American reforms suggests that the keiretsu and their Main Banks are economically rational institutions. Furthermore, Main Banks may have served as a mechanism through which new, postreform, ownership-monitoring was created. J. Japan. Int. Econ., March 1995, 9(1), pp. 154-173. Harvard Academy for International and Area Studies, 1737 Cambridge Street, Cambridge, Massachusetts 02138.