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Creditor-Focused Corporate Governance: Evidence from Mergers and Acquisitions in Japan

Published online by Cambridge University Press:  03 May 2011

Vikas Mehrotra ,
Dimitri van Schaik ,
Jaap Spronk  and
Onno Steenbeek
Vikas Mehrotra
Affiliation:
School of Business, University of Alberta, 4-20J Business Bldg., Edmonton, AB, T6G 2R6, Canada, vikas.mehrotra@business.ualberta.ca
Dimitri van Schaik
Affiliation:
Teijin Aramid, PO Box 5153, 6802 ED, Arnhem, The Netherlands, vanschaik_d@hotmail.com
Jaap Spronk
Affiliation:
Rotterdam School of Management, Erasmus University Rotterdam, PO Box 1738, Rotterdam, 3000 DR, The Netherlands, jspronk@rsm.nl
Onno Steenbeek
Affiliation:
Erasmus School of Economics, Erasmus University Rotterdam, PO Box 1738, Rotterdam, 3000 DR, The Netherlands, and ALM and Risk Department, APG All Pensions Group, The Netherlands, steenbeek@ese.eur.nl.
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Abstract

Mergers in Japan have the dubious distinction of not creating wealth for shareholders of target firms, in sharp contrast to what occurs in much of the rest of the world. Using a sample of 91 mergers from 1982 through 2003 we document several distinctive features of the merger market in Japan: Mergers tend to be countercyclical and appear to be driven chiefly by creditor concerns. In particular, where the merging firms share a common main bank, we find that merger gains are lower. Overall, our results point to a market that is distinctly less shareholder focused than that in the U.S., and a market where creditors play an important, perhaps dominant, role in corporate governance.

Type
Research Articles
Information
Journal of Financial and Quantitative Analysis , Volume 46 , Issue 4 , August 2011 , pp. 1051 - 1072
Copyright
Copyright © Michael G. Foster School of Business, University of Washington 2011

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