Corporate governance, political involvement, and internationalization: An empirical investigation in Japan and Taiwan

This paper investigates the effects of intervention by government and financial institutions on the degree of internationalization in Japan and Taiwan, with particular attention to the impact of the main bank system and the system of amakudari (the appointment of retired bureaucrats to the boards of...

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Bibliographic Details
Published in:Research in international business and finance 2017-01, Vol.39, p.640-655
Main Authors: Chen, Li-Wen, Yu, Hsin-Yi
Format: Article
Language:English
Subjects:
amakudari
Business–government relations
Corporate governance
Internationalization
Political intervention
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Summary:This paper investigates the effects of intervention by government and financial institutions on the degree of internationalization in Japan and Taiwan, with particular attention to the impact of the main bank system and the system of amakudari (the appointment of retired bureaucrats to the boards of public companies). The empirical results indicate that companies with a higher degree of internationalization have boards with stronger monitoring ability and therefore can fend off intervention by government. On the other hand, a negative relationship is established between the presence of retired bureaucrats on boards (amakudari) and the subsequent degree of internationalization. Similarly, intervention by financial institutions results in a lower subsequent degree of internationalization. Thus, although representatives of government and financial institutions may attempt to use their influence to prompt international expansion, the monitoring ability of the board may be jeopardized, to the detriment of internationalization.
ISSN:0275-5319
1878-3384
DOI:10.1016/j.ribaf.2016.07.023