Skip to Main Content
HBS Home
  • About
  • Academic Programs
  • Alumni
  • Faculty & Research
  • Baker Library
  • Giving
  • Harvard Business Review
  • Initiatives
  • News
  • Recruit
  • Map / Directions
Working Knowledge
Business Research for Business Leaders
  • Browse All Articles
  • Popular Articles
  • Cold Call Podcast
  • Managing the Future of Work Podcast
  • About Us
  • Book
  • Leadership
  • Marketing
  • Finance
  • Management
  • Entrepreneurship
  • All Topics...
  • Topics
    • COVID-19
    • Entrepreneurship
    • Finance
    • Gender
    • Globalization
    • Leadership
    • Management
    • Negotiation
    • Social Enterprise
    • Strategy
  • Sections
    • Book
    • Podcasts
    • HBS Case
    • In Practice
    • Lessons from the Classroom
    • Op-Ed
    • Research & Ideas
    • Research Event
    • Sharpening Your Skills
    • What Do You Think?
  • Browse All
    Governance Through Shame and Aspiration: Index Creation and Corporate Behavior in Japan
    07 Aug 2017Working Paper Summaries

    Governance Through Shame and Aspiration: Index Creation and Corporate Behavior in Japan

    by Akash Chattopadhyay, Matthew D. Shaffer, and Charles C.Y. Wang
    By exploiting the unique features of Japan’s JPX-Nikkei 400 index, this paper examines how membership in a stock index serves as a source of prestige that can motivate managers and influence corporate governance norms. Findings are important for understanding non-pecuniary mechanisms to induce meaningful changes in corporate behavior.
    LinkedIn
    Email

    Author Abstract

    We study how a stock index can affect corporate behavior by serving as a source of prestige. After decades of low corporate profitability in Japan, the JPX-Nikkei400 index was introduced in 2014. The index selected 400 large and liquid firms deemed to be best performing in terms of annual profitability; membership was considered highly prestigious. We document that index-inclusion incentives led firms to increase return on equity (ROE) proportionally by 35% on average through higher margins, efficiency, or shareholder payouts, depending on where firms had “slack,” but not through changing investments or accruals. These incentives are driven by the prestige associated with the index rather than capital market benefits. Back-of-envelope estimates suggest that the index accounted for 23% of the average increase in aggregate annual earnings over our sample period and a 3% increase in aggregate market capitalization. These findings highlight a novel mechanism through which long-standing corporate behaviors can be transformed.

    Paper Information

    • Full Working Paper Text
    • Working Paper Publication Date: August 2017
    • HBS Working Paper Number: HBS Working Paper #18-010
    • Faculty Unit(s): Accounting and Management
      Trending
        • 19 Sep 2023
        • HBS Case

        How Will the Tech Titans Behind ChatGPT, Bard, and LLaMA Make Money?

        • 14 Sep 2023
        • Research & Ideas

        Working Moms Are Mostly Thriving Again. Can We Finally Achieve Gender Parity?

        • 21 Aug 2023
        • Book

        You’re More Than Your Job: 3 Tips for a Healthier Work-Life Balance

        • 12 Sep 2023
        • Book

        Successful, But Still Feel Empty? A Happiness Scholar and Oprah Have Advice for You

        • 19 Sep 2023
        • Research & Ideas

        What Chandrayaan-3 Says About India's Entrepreneurial Approach to Space

    Charles C.Y. Wang
    Charles C.Y. Wang
    Tandon Family Professor of Business Administration
    Contact
    Send an email
    → More Articles
    Find Related Articles
    • Corporate Governance
    • Behavior
    • Status and Position
    • Motivation and Incentives
    • Investment Return
    • Financial Services
    • Japan

    Sign up for our weekly newsletter

    Interested in improving your business? Learn about fresh research and ideas from Harvard Business School faculty.
    This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
    ǁ
    Campus Map
    Harvard Business School Working Knowledge
    Baker Library | Bloomberg Center
    Soldiers Field
    Boston, MA 02163
    Email: Editor-in-Chief
    →Map & Directions
    →More Contact Information
    • Make a Gift
    • Site Map
    • Jobs
    • Harvard University
    • Trademarks
    • Policies
    • Accessibility
    • Digital Accessibility
    Copyright © President & Fellows of Harvard College