Holding Company and Bank: An Historical Comparative Perspective on Corporate Governance in Japan

In this paper I describe the historical evolution of corporate governance in Japan, and derive some insights on its future. In the 1920s, the Japanese economy suffered from a prolonged depression and inefficiency in corporate management, as in the 1990s. In this situation, two alternative systems of corporate governance, the holding company-based system and the bank-based system, were proposed for restructuring poorly managed companies, and in reality, the former system was proliferating. However, the experience during the Second World War made the Japanese corporate system choose the other fork in the road, the bank-based system. The changes in employment system and production management were complementary with the changes in corporate governance and finance. The Japanese corporate system, which was faced with a bifurcation in the 1920s and the 1930s, is now facing another bifurcation.