An Agency Comparison of the Keiretsu and the Japanese Independent Firm (Manuscripts) (Report‪)‬

INTRODUCTION Agency theory has been applied to the analysis of numerous organizational relationships and in various contexts. The concern of agency theory has been the conflicts that arise between agents and principals. When this theory is applied to the study of firms, this conflict becomes that between managers and the shareholders. Conflicts of interest are inherent in all contractual arrangements involving principals and agents. Whereas many of the studies of agency theory have focused on firms based in the United States, in this study we analyze a sample of Japanese firms. In our analysis, we question whether the Japanese keiretsu (or business group) experiences more agency conflict due to a lower shareholder orientation relative to a set of independent Japanese firms. We emphasize, however, that the contribution of our work is not the replication of previous findings. Although it may be beneficial to replicate agency-oriented North American studies in other environments, such efforts provide only limited insights. A comparative analysis of agency conflicts between keiretsu affiliated and independent Japanese firm has not been undertaken previously in the literature.