Japan’s Corporate Governance Structures and Credit Rating

Abstract

The aim of our research is to investigate whether good governance is associated with higher credit rating in Japanese firms. Mainly, this research seeks for the examination of the effect of governance attributes namely those related to the board and ownership structure also quality of information on credit ratings. Empirical analyses are conducted from a sample of 75 Japanese firms listed on Topix 100, over the period 2006- 2013 using Ordered Probit regression. The study shows that good governance is associated with higher credit rating and suggests that active monitoring by independent directors and better disclosure mitigate agency conflicts and protect the interests of debtholders.