We investigate why Japanese firms have adopted executive stock option pay, which was developed with shareholder-oriented institutional logic that was inconsistent with Japanese stakeholder-oriented institutional logic. We argue that Japanese managers have self-serving incentives to leverage stock ownership of foreign investors and their associated institutional logic to legitimize the adoption of stock option pay. Our empirical analyses with a large sample of Japanese firms between 1997 and 2007 show that when managers have elite education, high pay inequality with ordinary employees, and when firms experience poor sales growth, foreign ownership is more likely associated with the adoption of stock option pay. The study shows the active role of managers in facilitating the diffusion of a new governance practice embodying new institutional logic.
corporate governance, institutional logic, foreign ownership, stock option pay, practice adoption
Asian Studies | Corporate Finance | Strategic Management Policy
Strategy and Organisation
Strategic Management Journal
Wiley: 24 months
GENG, Xuesong; YOSHIKAWA, Toru; and COLPAN, Asli M..
Leveraging foreign institutional logic in the adoption of stock option pay among Japanese firms. (2016). Strategic Management Journal. 37, (7), 1472-1492. Research Collection Lee Kong Chian School Of Business.
Available at: http://ink.library.smu.edu.sg/lkcsb_research/4786
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