Ownership structure and firm profitability in Japan

We examined the relationship between the ownership structure and financial performance of 334 Japanese corporations for the 1986-91 period. The positive relationship we found between ownership concentration and financial performance is consistent with agency theory predictions. In addition, we observed a more pronounced profit redistribution effect characterized by the transferring of financial resources from more to less profitable firms. These findings indicate the need to account for both economic incentives and social context in corporate governance research.