Capital market and corporate governance: growth strategy of cotton spinning enterprise in the modern Japan

This paper examines how the corporate governance of the Japanese cotton spinning enterprise was formed in 20th century beginning. The establishment of the corporate governance which makes long-term growth possible has been thought to be reached by the rise of the professional manager who pursued growth strategy in the modern Japanese business history. However, it was not professional manager's rise, but this paper showed that a capital market played a decisive part so that the cotton spinning enterprises might do growth in the period between 1903 and 1918. Then, the incentive which followed the evaluation of the capital market was being given to a professional manager because of a professional manager's reward system's working with the stock prices together. The professional manager chose strategy corresponding to the evaluation of the capital market. The labor productivity of the enterprises that growth became possible was high relatively, and gained a high profit. The factor of this high labor productivity relatively was a labor equipment ratio.