Does governance matter? Performance and corporate governance structures of Japanese keiretsu groups

The paper presents an investigation of 72 Japanese manufacturing firms from five different industries with the focus on horizontal industrial groups (keiretsu). Data source was the Kaisha Database at the Science Center Berlin. The main findings are: Using the hexagon criterion to estimate the excellence of firms, the independent firms achieved better results. Thus we conclude that belonging to a keiretsu is no longer a guarantee for the success of a company. A different bank-firm relationship leads to different income distribution: the „old” keiretsu pay higher wages while the independent firms pay more dividend per share. Our best speculation is that the “old” keiretsu are still somewhat isolated from the market and the independent firms have to be more attractive to their shareholders. The structure of the boards of directors differs in following points: keiretsu firms have clearly larger boards than independent firms. Independent firms have on the average less directors dispatched from financial institutions, but do have a higher number of outsiders. They appoint more amakudari bureaucrats from the Bank of Japan and the Ministry of Finance to outbalance the better bank-firm relations of the keiretsu. The keiretsu, however, appoint more bureaucrats from state institutions related directly to their business.