Certified Financial Management Specialist Practice Exam

Which entities are typically involved in the Japanese corporate governance model?

1. Independent auditors and consultants

2. Government advisors and non-profits

3. Banks, affiliated entities, and major shareholders

4. Only government entities

The correct answer is: Banks, affiliated entities, and major shareholders

The Japanese corporate governance model primarily involves banks, affiliated entities, and major shareholders due to the unique relationships and structures that characterize Japanese corporations. In this model, banks play a crucial role as they often provide significant financing to companies and maintain close ties with them, influencing strategic decisions. Affiliated entities, including suppliers, customers, and sometimes even competing companies, create a network known as keiretsu, which fosters collaboration and stability among the entities involved. This interconnectedness enhances trust and enables long-term planning and investment. Major shareholders, which typically include institutions and family entities, also have a substantial impact on corporate governance, as they can influence management decisions and corporate policies through their voting power and engagement with the boards. In contrast, while independent auditors and consultants do play roles in governance across various contexts, they are not central to the typical Japanese model, nor are they the primary entities involved. Government advisors and non-profits might contribute to discussions on governance but do not hold the same significant stakes in the corporate structure as banks and shareholders do. The notion of "only government entities" overlooks the complex interplay of financial institutions and corporate relationships that are characteristic of Japan's corporate environment.