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Author: Misa Konomi
Publisher:
ISBN:
Category : Stockholders' derivative actions
Languages : en
Pages : 190
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Author: Misa Konomi
Publisher:
ISBN:
Category : Stockholders' derivative actions
Languages : en
Pages : 190
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Author: Dan W. Puchniak
Publisher: Cambridge University Press
ISBN: 1107012279
Category : Business & Economics
Languages : en
Pages : 477
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Book Description
In-depth analysis of the derivative action in Asia - a critical part of Asian corporate law and governance.
Author: Masafumi Nakahigashi
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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In this chapter, Nakahigashi and Puchniak explain that from 1950 until the mid-1980s the derivative action 'in practice' could not have been any more different in the United States and Japan. During this period derivative litigation (for better or worse) played a significant role in American corporate governance, with almost 20 per cent of US public listed companies experiencing one or more derivative suits. In stark contrast, in Japan from 1950 until the mid-1980s there was less than one derivative action on average per year, and not a single one of them was successful. Interestingly, this divergence between American and Japanese practice did not surprise academics. Rather, it was originally viewed as natural that Japanese shareholders would forgo suing for financial gain, because of their 'cultural obsession' for maintaining social harmony. Based on this theory, it made perfect (but economically irrational) sense that Japanese shareholders let their US-transplanted derivative action lie moribund for over three postwar decades when at the same time it was a staple of shareholder litigation in the United States. In the late 1980s, however, the powerful law and economics movement washed over Japanese legal scholarship, leaving the 'culturally irrational litigant' theory in its wake. The assumption that Japanese litigants were economically rational actors (i.e., as classical economic rational choice theory predicts that they would litigate only when the financial benefit from doing so exceeded the cost) became widely accepted. In turn, the absence of derivative actions in Japan became understood largely as the direct result of the high financial costs and meagre financial benefits that derivative litigation in Japan offered. The most common features cited for making it economically irrational to pursue derivative actions in Japan were similar to those cited for the dearth of derivative actions in most other countries: the application of the Shareholder Cost and Benefit Rules; the lack of a US-style contingency fee system; a 'loser pays costs' rule; weak pre-trial discovery rights; an absence of D&O liability coverage; and modest damage awards. As explained in Chapter 1, these economically unattractive features generally distinguish most other jurisdictions from the United States, and help explain the United States' relatively high rate of derivative litigation. In this sense, the economically rational explanation for the absence of derivative actions in Japan did not make it appear exceptional. However, some scholars pointed to the Japanese rule requiring plaintiff shareholders to pay an expensive stamp fee prior to filing a derivative action as an additional idiosyncratic economic deterrent to derivative actions in Japan. In short, in the early 1990s, it appeared that the mystery of the dearth of derivative actions in Japan had been solved. Like most other jurisdictions, except for the United States, it was economically irrational for Japanese shareholders to pursue derivative actions, and so they did not. This made perfect sense - until, suddenly, it did not. As Nakahigashi and Puchniak's research reveals, in the early 1990s the number of derivative actions in Japanese public companies skyrocketed to US levels. This left the few remaining proponents of the 'culturally irrational Japanese litigant' theory dumbfounded. However, the proponents of the economically motivated and rational Japanese litigant theory did not go quietly into the night. To the contrary, they posited that the dramatic rise in derivative actions was the direct result of a 1993 change in the Japanese law that effectively eliminated the requirement for plaintiff shareholders to pay the expensive stamp fee to file a derivative action. In short, this explanation (which has become the consensus in the literature) suggests that, since the elimination of the stamp fee in 1993, economically motivated and rational Japanese shareholders have utilized derivative actions because the financial benefit of doing so now exceeds the cost. In this chapter, Nakahigashi and Puchniak challenge this consensus view. Based on the largest econometric and empirical study to date, they demonstrate that the consensus view is fundamentally flawed, for three reasons: (1) the dramatic increase in derivative actions began several years prior to the 1993 stamp fee reduction; (2) even after the 1993 stamp fee reduction empirical evidence demonstrates that neither shareholders nor attorneys have financially benefited from derivative litigation; and (3) even after the 1993 stamp fee reduction the cost-benefit calculus for pursuing a derivative action in Japan has been like most other countries, which have a dearth in derivative actions. The evidence that litigants are not pursuing derivative actions for direct economic gain is clear. However, this obviously raises a conundrum: what is driving the relatively high level of derivative litigation in Japan? Nakahigashi and Puchniak demonstrate, on the basis of their empirical research and case studies, that there are two types of litigants driving derivative actions in Japan - neither of which is financially benefiting directly from derivative actions. First, there are the 'quasi-rational' shareholders, who bring derivative actions for non-monetary benefits. The most important of these is an activist group - the Kabunushi (shareholders') Onbuzuman - that pursues derivative actions to advance its political agenda. Second, there are the 'purely irrational' litigants, who, as a result of bounded rationality (e.g., the use of inaccurate mental heuristics, self-serving bias and herding behaviour), irrationally pursue derivative litigation in Japan. Thus, through the Japan experience, Nakahigashi and Puchniak reveal that, even if the regulatory structure of a derivative action does not make it economically rational to sue, a substantial number of derivative actions may nevertheless still occur.
Author: Jun Usami
Publisher:
ISBN:
Category : Holding companies
Languages : en
Pages : 118
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Author: Yuchen Song
Publisher: Open Dissertation Press
ISBN: 9781361022924
Category : Law
Languages : en
Pages : 134
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Book Description
This dissertation, "Exploring Derivative Action in Japan and China" by Yuchen, Song, 宋雨晨, was obtained from The University of Hong Kong (Pokfulam, Hong Kong) and is being sold pursuant to Creative Commons: Attribution 3.0 Hong Kong License. The content of this dissertation has not been altered in any way. We have altered the formatting in order to facilitate the ease of printing and reading of the dissertation. All rights not granted by the above license are retained by the author. Abstract: Derivative action is a means of enforcing directors to carry out their fiduciary duties to a company through judicial resolutions. Such a private enforcement is one of the essential mechanisms that reduce agency costs in a mature market economy. The institution of derivative action originated from the British equity law, and was further developed and implemented in the United States. Japan, South Korea, Taiwan and Mainland China all introduced derivative action one after the other. Among the transplanted countries, Japan experienced a sharp increase of derivative actions in the 1990s, while the other countries had fewer derivative cases. This thesis first focuses on the popularity of derivative action in Japan in the 1990s by discussing the legal framework, social and economic backgrounds, and interconnected institutions related to derivative action, in order to determine the incentives for shareholders to sue. Professor Mark D. West, Professor Dan W. Puchniak and Professor Shiro Kawashima all conducted in-depth research and made outstanding contributions on this issue. West believed the direct benefits to Japanese attorneys led to the advent of derivative actions, while Puchniak disagreed, and indicated that shareholders and their attorneys in carrying out derivative actions are irrational and not economically motivated. Kawashima gave more attention to the social aspects of that period of time and inferred that a series of social events triggered the interest to sue. Through a study on the degree of the development in derivative actions, as well as the related features and changes in Japan, my conclusion is that the establishment of self-reinforcing and interconnected institutions led to path dependence on derivative action, which is the real reason for the popularity of derivative action in Japan. Specifically, the crucial self-reinforcing institutions that contribute to the significant increase in derivative action comprise the common fund principle, which provides indemnity for the litigation costs of plaintiff shareholders when they win a case; the contingency fee arrangement, which transfers litigation risks from plaintiffs to their attorneys; and the discovery rule, which facilitates the access of plaintiffs to corporate internal information. The conclusion is drawn from the path dependence theory, in that the consolidation of any initial path requires the support of the interconnected institutions, especially those with a self-reinforcing nature. This explanation goes beyond the case of Japan, and can also account for the case of China. Introduced in 2006, the derivative action in China has been modest, with around 10 cases per year. However, after studying the Chinese legal framework of derivative action, I have found an intriguing item, that among all of the derivative suits, only one involved a publicly held company. A cost-benefit analysis has indicated that there is a serious lack of incentives for shareholders in publicly held companies and their attorneys to sue because of the imbalance between litigation costs and benefits. Again, the reluctance to sue is found to originate from the incomplete interconnectedness of institutions based on the path dependence theory. Finally, the experience of Japan can be viewed as an example of establishing these critical self-reinforcing institutions. DOI: 10.5353/th_b5689308 Subjects: Stockholders' derivative actions - Japan
Author: Isao Ijuin
Publisher:
ISBN:
Category : Stockholders' derivative action
Languages : en
Pages : 308
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Author: Mitsuru Misawa
Publisher: World Scientific Publishing Company
ISBN: 9813106743
Category : Business & Economics
Languages : en
Pages : 464
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Book Description
This is one of the few books written in English by a Japanese author with expertise in finance, law and business. The book presents issues pertaining to the three areas from Japan's and US viewpoints, and is based on ten articles, published in reputable journals, on current issues in finance and law in Japan. It includes additional comments on Japan's banking and finance industry. The book contains a number of citations which will help readers understand more about Japanese law and finance. It also serves as a reference source for people outside Japan interested in Japanese law and finance. This book will be of interest to businessmen, accountants and lawyers who wish to know more about the second largest economy in the world.
Author: Mitsuru Misawa
Publisher: World Scientific Publishing Company
ISBN: 9813107693
Category : Business & Economics
Languages : en
Pages : 596
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Book Description
This book is the 2nd edition of the author's earlier book with the same title. It contains additional five chapters that are added to reflect the most recent changes in the economy and law in Japan.At a time when foreign interest in the current Japanese market and economy is significant and becoming increasingly prominent, Japanese corporate behavior and practices are two potentially confusing areas for international businessmen, accountants and lawyers. This book features numerous insights into Japanese perspectives on finance, law and business, based on the author's expertise in these three areas. As the data provided in this book is pertinent to understanding Japanese laws and business practices, this text will be of great interest to foreign companies aspiring to be successful in Japan./a
Author: Gen Goto
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Foreign investors often criticize Japanese corporations for not paying enough attention to the interests of their shareholders. It might surprise these critics, then, to learn that shareholders' legal rights under the Japanese Companies Act are actually quite strong. Indeed, many of the rights that shareholders' rights advocates often support, including shareholders' power to alter a corporate charter without board consent, shareholders' power to control dividend payments, majority voting for board elections, shareholders' power to replace the board of directors, and shareholder access to a corporate ballot - all of which are strongly debated elsewhere - are already effective in Japan. Moreover, derivative suits are easily initiated and maintained. Shareholders of Japanese corporations are, therefore, in an arguably stronger position than those in, for example, the United States. Still, notwithstanding these Japanese statutory rights, foreign investors' criticisms persist. Two questions arise from this debate. First, why are shareholders of Japanese corporations unable to leverage their strong rights to force corporate management to prioritize shareholders' interests? Alternatively, why are shareholder activists inactive in Japan? Second, if the existing shareholders' rights are not actually used for activism, are they completely meaningless? Or, do they have alternative effects, whether positive or negative? This article answers these questions by summarizing and categorizing the rights of shareholders of Japanese corporations into two characteristics. First, shareholders of Japanese corporations have strong class-based rights with respect to decision-making on a wide range of matters related to the corporation and ample opportunity to take an initiative. These rights might, in fact, be too strong, inducing managers to insulate themselves by engaging in so-called “cross-shareholding” (kabushiki mochiai) relationship, which in turn likely weakens the rights of other shareholders in practice. The lack of support provided to activist shareholders by other shareholders, especially those in cross-shareholding relationships, is the primary cause of activist ineffectiveness in Japan. When cross-shareholdings are unwound, however, these shareholder rights function as a latent threat on managers, disciplining them. The keys to ensuring that class-based shareholder rights are meaningful are, thus, distribution of share ownership and restraint on management's attempt to manipulate this distribution. Unfortunately, it is not easy to unwind already-established cross-shareholdings through regulatory intervention. Second, shareholders also possess strong individual rights to raise issues with the corporation, either by asserting a shareholder proposal or filing a derivative suit, neither of which would the corporation disrupt for the interest of other shareholders. These rights, again, might be too strong, incentivizing individuals to take advantage of them in pursuit of personal goals, rather than for the good of the corporation. Yet, whether the use of these individual rights amounts to an abuse hinges on an evaluation of the benefits achieved, namely, the supply of diverse views through shareholder proposals and the deterrence effect of derivative suits. Possible future reforms to Japanese law ought to consider how to strike the right balance of power for shareholders of Japanese corporations.
Author: Dan W. Puchniak
Publisher:
ISBN:
Category :
Languages : en
Pages : 82
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Book Description
Not long ago, there was a ...
