Corporate Law Reform and Political Environment: An Empirical Analysis Employing Public Comment Procedure Data

Abstract

Corporate law shapes the fundamental business environment and affects various stakeholders such as shareholders, managers, employees, and creditors. Each stakeholder has an incentive to influence the reform process of corporate law. The many corporate law reforms in Japan reflect its rapidly changing business environment. It is possible to determine the behaviour of various stakeholders by examining the politics of the reform process of corporate law.In order to understand the corporate law reform process, this paper uses the notice-and-comment procedure (`public comment procedure'), which was introduced by the Administrative Procedure Act in 1993. The Administrative Procedure Act requires every law reform or order proposed by a government agency to undergo a public comment procedure. Under this procedure, people submit comments to the Ministry of Justice; some of these comments are reflected in the final bill, whereas others are not. The paper performs a quantitative analysis of a hand-collected dataset from two recent public comment procedures on corporate law reform. By analysing the comments with respect to the issues, we can understand the mechanism of the corporate law reform process, particularly the relative political power of various interest groups.The results showed that the bureaucrats are rigid and not willing to take public comments seriously. However, on some technical issues, legal academics and legal professionals, such as courts and law firms, influence the behaviour of the bureaucrats. The results showed that the bureaucrats employed these comments to honour the technical views of professionals. In other cases, corporate managers significantly influence the reform process. The results did not support Croley's (2007) independence hypothesis about government agencies.