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Hatsuru Morita University of Chicago and Tohoku University Talk at the Japanese Law Association

Decomposing the corporate law reform and behavior of MOJ: an empirical analysis through public comments procedure in Japan. Hatsuru Morita University of Chicago and Tohoku University Talk at the Japanese Law Association Jan ??, 2006. Motivation.

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Hatsuru Morita University of Chicago and Tohoku University Talk at the Japanese Law Association

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  1. Decomposing the corporate law reform and behavior of MOJ: an empirical analysis through public comments procedure in Japan Hatsuru Morita University of Chicago and Tohoku University Talk at the Japanese Law Association Jan ??, 2006

  2. Motivation • Repeated big reforms of the corporate law in this decade • Only part of actors are subject to analysis • Managements and labor unions • The role of the bureaucrats of the ministry of justice has never been explored • Public comment procedure • Originally introduced as a governmental guideline in 1999 and incorporated into the APA in 2005 • However, almost no analyses have been made

  3. Public comment procedure • The cabinet decision of Mar 23, 1999 • When a branch of the government makes a regulation, it is required to publicize the draft of the regulation and to get comments on the draft • Although the branch is not bounded by the comments, it must publicize “the result of its consideration” • In 2005, this was incorporated in the APA

  4. Process of corporate law reforms Legal Council MOJ Diet Managements Employees Consumers Lawyers Judges Academics Public Comment Procedure Managements

  5. Competing theories on the bureaucratic behavior • Public comment has no effect • Public comment has large effect • Observe only the influence of powerful interest groups • MOJ employs public comment procedure in order to countervail the pressure of interest groups • Only “convincing” comments have effect

  6. Looking for data • Usually, only “the result of the consideration” is published • You can only know what sort of comments are submitted and whether the original draft has been changed or not • As to two corporate law reforms, every single comment is published • A nice data source to test theories! • 2002 reform and 2005 reform

  7. Looking for data (cont’d) • How to construct the datasets • Divide the drafts into single issues • Check the outcome • Whether the final bill is the same as the original draft or not • Count the numbers of “Yes”s and “No”s • Also note what type of group submit the comment

  8. Estimation strategy • Regression by OLS Probability of “success” = # of Yes’s + # of No’s + controls + ε * # of Yes’s and No’s are decomposed by type of group

  9. Predictions of the theories • No effect • No comment is significant • Special explanatory variable: “expression” • Whether the issue has the form of “shall be ~” or “how about ~” • Strong effect • # of Yes’s and No’s have significant effect on the outcome

  10. Predictions (cont’d) • Interest groups’ pressure • Only the # of Yes’s and No’s from managements have significant effect • Independence model • The # of Yes’s and No’s from managements are not significant • Non-interest groups (academic?) have significant effect (especially where the pressure of interest group is expected to be high)

  11. Predictions (cont’d) • Persuasiveness matters • No clear prediction? • The # of Yes’s and No’s from managements are not significant • Those who are used to present legal(?) discussions can have significant effect (= academics?)

  12. The dataset • 2002 corporate law reform and 2005 corporate law reform • Hand-collected dataset from the publication of MOJ • Classification of the commenters • Business community (= managements) • Financial institutions (Banks, etc) • Academics • Other (Bar ass’ns, NPOs, etc)

  13. The dataset (cont’d) • Classification of issues • Regulatory / enabling • Under the recent trend of “deregulation” in Japan, the more regulatory a proposals is, the more “high-stake” it is • Expression by the drafter (MOJ) • “shall be ~” • “how about ~”

  14. Summary Statistics of 2005

  15. Result of 2005

  16. Subset of the data

  17. Summary Statistics of 2002

  18. Result of 2002

  19. Subset of the data

  20. Conclusion • General points • Different groups have different influences • The nature of issues matters • Evaluation of the theories • MOJ has strong control on the outcome • The managements has strong influence particularly where the stake is big • Academics have significant influence when the stake is small • Interest group explanation and convincing explanation hold, while independence explanation does not seem to hold

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