Benchmarking business unit governance in turbulent times: The case of Japanese firms

Hidetaka Aoki, Hideaki Miyajima

Research output: Contribution to journalArticle

1 Citation (Scopus)

Abstract

Purpose: The purpose of this paper is to examine how corporate headquarters control business units, the governing of which has emerged as a vital issue as business portfolios have grown increasingly complex due to diversification, globalization, and corporate group expansion via spinoffs and mergers and acquisitions. Design/methodology/approach: This study utilized questionnaire survey data from 251 firms listed on the First Section of the Tokyo Stock Exchange. The authors approached the issue of business unit governance by measuring the degree of decentralization and the intensity of monitoring, and compared the governance of internal business units with that of subsidiaries, and analyzed the impact of corporate governance characteristics on business unit governance. Findings: Comparing in-house business units and subsidiaries, the authors found a significant difference in their governance. The degree of decentralization toward subsidiaries was higher for strategic and personnel decision-making. However, the complementarity of decentralization and monitoring was not observed for subsidiaries, whereas it was for in-house business units. Subsidiary monitoring corresponding to decentralization was inadequate. Examining the relationship between corporate governance and business unit governance, the paper found that firms with reformed boards of directors and under a greater degree of pressure from capital markets monitored their business units more strictly. Originality/value: The paper shows how the business portfolios and governance arrangements of Japanese firms have changed since the 1990s, and analyzes business unit governance based on valuable data obtained from a questionnaire survey.

Original languageEnglish
Pages (from-to)548-566
Number of pages19
JournalBenchmarking
Volume19
Issue number4
DOIs
Publication statusPublished - 2012 Jul

Fingerprint

Benchmarking
Governance
Japanese firms
Subsidiaries
Decentralization
Monitoring
Corporate governance
Questionnaire survey
Decision making
Corporate groups
Capital markets
Spin-offs
Personnel
Survey data
Board of directors
Diversification
Complementarity
Tokyo Stock Exchange
Mergers and acquisitions
Globalization

Keywords

  • Business unit governance
  • Corporate governance
  • Decentralization
  • Governance
  • Internal business unit
  • Japan
  • Monitoring
  • Two-tiered agency relationships
  • Wholly owned subsidiary

ASJC Scopus subject areas

  • Business and International Management

Cite this

Benchmarking business unit governance in turbulent times : The case of Japanese firms. / Aoki, Hidetaka; Miyajima, Hideaki.

In: Benchmarking, Vol. 19, No. 4, 07.2012, p. 548-566.

Research output: Contribution to journalArticle

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