Japanese Corporate Finance in the Light of Recent Developments in Principal Agent Problems

Research Project

Project/Area Number	62530062
Research Category	Grant-in-Aid for General Scientific Research (C)
Allocation Type	Single-year Grants
Research Field	Public finance/Monetary economics
Research Institution	Kyoto University
Principal Investigator	ARIGA Kenn Institute of Economic Research, Kyoto University, Associate Professor, 経済研究所, 助教授 (60159506)
Co-Investigator(Kenkyū-buntansha)	TANIGAWA Yasuhiko Department of Economics, Okayama University, Instructor, 経済学部, 専任講師 (60163622) IKEO Kazuhito Department of Economics, Kyoto University, Associate Professor, 経済学部, 助教授 (00135930)
Project Period (FY)	1987 – 1988
Project Status	Completed (Fiscal Year 1988)
Budget Amount *help	¥1,400,000 (Direct Cost: ¥1,400,000) Fiscal Year 1988: ¥500,000 (Direct Cost: ¥500,000) Fiscal Year 1987: ¥900,000 (Direct Cost: ¥900,000)
Keywords	Main Banks / Mutual Share Holding / Principal Agent Problem / 本人=代理人問題 / 情報の非対称性 / 金融仲介 / 金融業の産業組織 / 証券業と金融業 / ユーロ市場
Research Abstract	Stylized facts of corporate finance in the postwar Japan are interpreted and analyzed in a model of multi-lateral principal agent problem, wherein managers finance the project by issuing stocks as well as borrowing money from banks. We show that, in a two period model, the following features arise as the equilibrium with longterm commitments by banks and stockholders: (1) share holdings by banks to optimally choose the reward schedule for the manager, (2) delegation of minitoring as well as intervening functions against the management to the bank, and (3) dismissal of the manager as a discipline device which dominates the bankruptcy option. These features are in broad accordance with the stylized facts of the Japanese economy from 1950 through mid-1970s.