  Activist investors have gradually become a catalyst for change in Japanese
companies. This study examines the impact of activist board representation on
firm performance in Japan. I focus on the only two Japanese companies with
activist board representation: Kawasaki Kisen Kaisha, Ltd. ("Kawasaki") and
Olympus Corporation ("Olympus"). Overall, I document significant benefits from
the decision to engage with activists at these companies. The target companies
experience greater short- and long-term abnormal stock returns following the
activist engagement. Moreover, I show operational improvements as measured by
return on assets and return on equity. Activist board members also associate
with important changes in payout policy that help explain the positive stock
returns. My findings support the notion that Japanese companies should consider
engagements with activist investors to transform and improve their businesses.
Such interactions can lead to innovative and forward-thinking policies that
create value for Japanese businesses and their stakeholders.
