Insitutionalization has been accelerated in the Japanese stock market since the 1980s. In the late 1990s, it seems that behavior of institutional investors has significantly affected market values of the firms they invest in. Thus, it has become increasingly important to consider the role of institutional investors in the Japanese corporate governance system in transition. According to a result of questionnaire research on the financing behavior of non-financial listed companies, which was published from the Policy Research Institute in 1999, large part of respondents answered that they should deepen relations with institutional investors as major stakeholders of their companies.
In the United States, since the 1980s, institutional investors have behaved as active shareholders. In addition, it is widely recognized that the shareholder activism by large pension funds contributed to improvement in efficiency of corporate management. In Japan, it has been said that banks played key role in disciplining the corporate management of their borrowers, but the banks are in distress at present. Will the institutional investors play a critical role to discipline corporate management effectively, as in the United States? Will the institutional investors function to substitute or complement decreasing monitoring activities of banks in the prolonged financial crisis?
See full Review.
See also Financial Review 68, Corporate Governance II.
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