A Comparative Study: The Impact of managing partners and foreign stockholding on corporate enterprise value in Japanese and Korean firms

Abstract

Japan and Korean firms are highly competitive in similar fields. However, the structure of the corporate governance is different, especially structure of the shareholders. Japan has a Main Bank system in which bank can be a big shareholder. On the other hand, in Korea, owner has a dominant power over the whole group companies. Managers basically try to expand and improve the value of the company in both Japan and Korea. It means that Alignment effects are bigger than Entrenchment effects in both countries. Also, there is a certain point in which Entrenchment effects can be bigger than Alignment effects. In the range, managers try to enjoy their position and would satisfy their assets enough. Thats why in both countries managers shareholdings can be negative. However, once shareholdings are bigger than ii around 50%, manager would consider their firms assets as their own private assets. In this case, alignment effects will show up again. Eventually both Japan and Korea show similar results in terms of impacts of managers shareholdings on firms value even the structure of corporate governance is different.