Rahman, Khondaker Mizanur and Marc Bremer, Marc Bremer
(2016)
Effective Corporate Governance And
Financial Reporting In Japan.
Asian Academy of Management Journal of Accounting and Finance, 12 (1).
pp. 1-31.
ISSN 1823-4992
Abstract
This paper examines corporate governance in Japan since the 1990s. Its focus includes
financial reporting, a key part of good governance. It offers an overview of various legal,
institutional, and stakeholder aspects of governance, followed by an investigation of
Japanese accounting, disclosure, and reporting. The paper presumes that accurate
financial reporting is a prerequisite for good corporate governance. Bad governance
often follows from fraudulent financial reporting. The paper also considers the status of
international financial reporting standards, the nature of fraudulent financial reporting,
the all-too-common practice of window dressing in Japan, the liabilities of corporate
audit board members and financial auditors. Our findings suggest that the existing high
quality laws, codes, guidelines, and institutional arrangements do improve corporate
governance. Yet in practice, the quality of corporate governance in Japan has not
matched the quality of its codes and regulations. The paper discusses Japan's new
corporate governance code. It concludes that this code is excellent, but that more needs
to be done to improve financial reporting. Finally, a number of suggestions are offered to
enhance corporate governance and reduce fraudulent reporting.
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