Relationship Between Outside Directors and Corporate Value Improvement Strategy

Abstract: This research investigates the relationship between effective corporate governance structure and disclosure transparency of financial statements. The effectiveness of corporate governance is measured by the Outside Director ratio, the trend of Outside Directors (increase or decrease from 2015/2013), the characteristics of Outside Directors, and an appropriate assessment design of corporate governance. The disclosure quality is the magnitude of the variance (△Var2015/2014) between earnings management (Net income) and cash flow. The variance indicates deliberate errors, while the narrow spread between net income and cash flow represents qualitative disclosure. From 3,500 Japanese listed companies’ populations, 100 samples are selected based on the △ Variance divided by the amounts of sales. The results suggest that a positive influence on the quality of a company’s financial statements. The evaluation of the effectiveness of outside director corporate governance is crucial for the direct fund-raising transparency in the Japanese market. As a result, regression abductive analysis leads to a positive influence. However, a few studies have examined whether this governance improves the performance of Japanese corporates. Therefore, this research aims to: 1) clear the current value of corporates in Japan and 2) investigate the relationship between outside directors and corporate value improvement strategy by using an inductive case study approach to determine another factor that improves corporate value. The present research contributes to the increase of the corporate value.

Key words: direct fund-raising transparency Japanese market, outside director, corporate governance, corporate value improvement strategy, regression abductive analysis

JEL code: M