THE ROLE OF OUTSIDE STATUTORY AUDITORS IN BANK-DOMINATED CORPORATE GOVERNANCE: EVIDENCE FROM JAPAN

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Abstract

This paper examines whether or not the role of outside statutory auditors are effective post the amendment of commercial law in Japan. By this amendment, Japanese large firms are urged to appoint at least one auditor. Under bank-dominated corporate governance, the monitoring role of
outside auditors do not seem to be strongly expected. The empirical question arises of whether outside auditors in Japan are effective monitors or not post the amendment of commercial law. We find managerial entrenchment effects exist for the appointment of larger outside auditors. In addition, we can find a negative relation between bank ownership and firms with more outside auditors. These findings suggest that outside auditors have not still been expected for adequate gatekeeper in Japan.

Keywords: Bank Ownership; Corporate Governance; Japan; Statutory Auditors

How to cite this paper: Watanabel, N., & Sakawa, H. (2014). The role of outside statutory auditors in bank-dominated corporate governance: Evidence from Japan. Corporate Board: role, duties and composition, 10(1), 39-48. https://doi.org/10.22495/cbv10i1art3