Abstract
This paper investigates the incentive structure that encourages the appointment of retired bureaucrats in the boardrooms of the Japanese private corporations. For the sample of 4590 firm-years from 25 industries we find that such appointments are more likely to occur (i) if private corporations have business with the government. (ii) We find such incentive is more emphasized for larger sized corporations. (iii) However, for firms with smaller market shares facing more competition, we find that incentives to hire retired bureaucrats increase. (iv) We also find firms that belong to corporate groups (keiretsu) are less likely to hire retired bureaucrats. The evidence suggests existence of tacit collusion between the government and the private corporation as also lent support to 'equalizing process' theory.
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