Ownership structure, investment behaviour and firm performance in Japanese manufacturing industries

Using data spanning the 1996-98 fiscal years of 247 of Japan's largest manufacturers, we empirically evaluate the extent to which a firm's investment behaviour and financial performance are influenced by its ownership structure. To do so, we examine six distinct categories of Japanese shareholders: foreign investors, investment funds, pension funds, banks and insurance companies, affiliated companies and insiders. Our findings strongly indicate that the relationship between the equity stakes of a particular category of investor and a firm's financial performance and investment behaviour is considerably more complex than is depicted in simple principal-agent representations. Such a result emphasizes the importance of making finely grained and contextually relevant distinctions when modelling and evaluating corporate governance relations.