Determinants of the Timing of Downsizing Among Large Japanese Firms: Long-Term Employment Practices and Corporate Governance

Authors


  • I would like to acknowledge financial support from the Japanese Bankers' Science Foundation (Zenkoku Ginkou Gakujyutsu Shinkou Zaidan). I would also like to thank the many participants in and colleagues at the international workshop, “Corporate Governance and Labor Relations” on 27 February 2009—especially Takuji Saito, Katsuyuki Kubo, and Takao Kato—for their helpful comments—as well as the editor and the anonymous referee of this journal.

Abstract

This paper analyses the relation between corporate governance and employment adjustment behaviour among Japanese firms. The results are summarized in the following two points. First, in the period before 1997, although main banks were likely to allow firms' employment maintenance until they experienced 2 consecutive years of losses, they tended to press firms to downsize once firms faced financial distress. Second, the reduced function of main banks and the increased influence of foreign owners have changed the timing of downsizing since 1997. Changes in corporate governance have brought about slight but non-negligible changes in Japanese employment practices.

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