Structural Model Of The United States And Japan Corporate Governance And Revelation

Modem stock company has developed from individual enterprise. With the deviation of the property ownership and management, managers took over the power to control the company, which causes the principle-agency problem. Under asymmetries of information and discrete contracting there exist the principle cost and the possibility of moral hazard and adverse choice behaviors. Corporate governance refers to the institutions and mechanisms in which suppliers of finance to corporations control managers to ensure returns on their investment. The institutions and mechanisms are much different in Japanese corporations when compared to Americans, whether on the financial style, ownership structure or the control and incentive mechanism. American model have main shareholders as individual and institutional investors, while Japanese model sees a majority shareholder of main bank and stock mutual-holding companies.Maximum of shareholders' benefit is preferable in former model, contrasting to the stable ownership and companies' benefit the first in Japan. As for the corporate control mechanism, they are remarkably different too, In the United States, shareholders' influence on management is weak, indirect monitor and control measures are used. Unsatisfactory performance is often sanctioned by shareholders selling shares ("Voting by feet") and by subsequent hostile takeovers. Shareholders' interest is protected largely by a liquid equity market which includes an active takeover market, a well-functioning and competitive market for managers and a concentration of lenders. In Japanese model, management is under more scrutiny by those core investors. Concentration of ownership provides the investors with both incentive and the ability to monitor and control the management. On the organization structure the board of directors in America owns two functions as to make up the strategy and monitor the management and the board of directors is mostly constituted of outsiders in order to keep independent, while there are two-system structure of supervision as the board of directors and the supervisory committee hi Japan and the directors are often promoted inside. On incentive arrangement, stock option is widely adopted in U.S., hi Japan people pay more attention to the employment and the loyalty for the company. Recently there have some changes of corporate governance in both models, institutional investors began playing a more active role, the monitoring and incentive institutions have been unproved.The reform of corporate governance hi China is characterized by the shifting of residual control and benefit to the managers. So at the present situation of the corporate governance of stock-listed companies there are some problems such as the irrational stock ownership, the weak monitoring and incentive institutions, and the insider controlling, which harm the benefits of the whole shareholders. Given the indications, some beneficial suggestions should be adopted.