Structure of Corporate Ownership in Japan

The enterprise ownership structure in Japan is quite different from their counterparts in the western countries, with the ownership has been highly concentrated in Japan. The Japanese Law allows institutional investors to exert more in control of companies and their management inducing them to seek a higher level of equity. In fact, there is a significant difference between Japan and US about the corporation ownership. Ownership by financial institutions (especially commercial banks) is greater in Japan than in the United States. Japanese commercial banks and insurance companies hold about two to three times the number of outstanding shares of listed company than their US counterparts do. On top of being a major shareholder, financial institutions play the roles of also being the largest creditors of the firms. While in the same time, they are playing as an important long-term commercial business partner. For example, it has been shown that out of 344 manufacturing corporations, financial institutions own 34.48% of the common equity and individuals own 29.53%. Therefore, many Japanese firms get more debt from those financial institutions that having highly concentrated in the ownership of the company.
Ownership concentration did not differ significantly between keiretsu and independent Japanese firms. With high ownership concentration and cross-share holding by banks, suppliers and customers, keiretsu firms are able to monitor decisions of firms’ internal activity and direct management s actions to benefit the whole and to act as a collective, but not just being contractual business partners.


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