Corporate Governance of Japanese Institutional Investors
Major Results of Questionnaires concerning Corporate Governance by Institutional Investors

INTRODUCTION
The Japanese economy has been in a long-lingering depression since the economic bubble burst in 1989. The recovery of the business performance of Japanese companies is an urgent task to ensure the economic recovery of Japan. Some have pointed out that one of the reasons for unsatisfactory development in terms of steady recovery of business performance is the insufficient functioning of corporate governance.

Currently, as banks that have been involved in corporate management in various ways have failed one after another, it is said that the fund raising method is shifting from indirect financing from markets to direct financing through intermediaries as a result of the Financial Big Bang. In such new circumstances, Japanese companies are required to establish a new corporate governance system in place of the traditional one that is lead by banks.

On the other hand, as institutionalization has been rapidly developing in the stock markets in Japan, evaluation of corporations in the market depends on the behavior of institutional investors. Therefore, it is sometimes pointed out that the behavior of institutional investors is becoming essential when considering corporate governance.

Shareholder activities of institutional investors, in particular, are focused on as the driving force that can alter the Japanese governance system from the viewpoint of outsiders, while the monitoring functions by insiders including banks and affiliated companies through cross shareholdings are expected to decline.

Is the shareholder activism of institutional investors that is observed in other advanced countries able to play a decisive role in corporate governance also in Japan? How do Japanese institutional investors recognize the necessity of governance against companies in which they have invested, and how are they going to affect corporate management? What is the purpose of governance activities by institutional investors? Is it to maximize share price, to coordinate interests between various stakeholders, or to cooperate among them?

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PRI Discussion Paper Series

Table of Contents
Outline １
I. Introduction ３
II. Characteristics of Japanese Institutional Investors ５
III. Questionnaires concerning Corporate Governance
of Japanese Institutional Investors ７
IV. Consciousness and Behavior of Pension Funds
and Trustee Organizations – Results of Questionnaires １０
V. Conclusion ２６

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