Financial Analysis : Japan's Financial Markets

1191 Words Feb 25th, 2016 5 Pages
INTRODUCTION

In March 2015, Japan’s Financial Markets Agency for the first time in its history set out Corporate Governance Code and a year earlier Stewardship Code. Even though some efforts towards corporate governance and transparency have been made in Japan previously, specifically introduction of dual system in 2003, they did not gain popularity. Only 40 out of 3,000 firms adopted this system immediately rising to 112 five years later. However, these codes were necessary due to the pressure from foreigners investing and doing business in Japan, several scandals such as Olympus 2011-2012 accounting scandal and ineffective, high cash holdings of Japanese companies (Eberhart, 2012).
They are both addressing different aspects, but principal-based Governance code is binding on all non-foreign companies listed on securities exchanges in Japan and mirrors the UK’s approach to Corporate Governance while Stewardship Code is on voluntary basis (Freshfileds Bruckhaus Deringer, 2015).
This essay seeks to determine how the reforms from 2014, 2015 and dual system from 2003 influenced companies’ performance and provides the evidence that transparent corporate governance leads to higher performance of the firm. In order to respond to the question, it is first necessary to examine collected empirical evidence from Tokyo Stock Exchange and further analyze using Stata.

LITERATURE BACKGROUND AND METHODOLOGY

The analytical section considers panel data on Japanese companies listed…
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