Mari Sako

Katsuyuki Kubo

Professionals On Corporate Boards In Japan: How Do They Affect The Bottom Line?

Keywords: Professionals, lawyers, accountants, corporate governance, board of directors, actor-centered institutionalism. JEL Codes: M12, L84, G32, G34

Licensed professionals, such as accountants and lawyers, play a variety of roles when they sit on corporate boards. This paper sheds light on what role professional-directors play under what circumstances, and its consequences for corporate performance. We develop a theory that links professional roles (as cops, counsel, or entrepreneur) to antecedents in terms of external environment (notably the extent of government regulation) and to consequences for firm performance (profitability, corporate valuation, and stock return volatility). Using a data of all publicly quoted companies in Japan during 2004-2015, we demonstrate that the presence of professional-directors increases profitability and corporate valuation in all sectors, and that they contribute to higher stock return volatility in regulated and lower volatility in less regulated industries. The differential impacts of professional roles on firm performance -by acting as 'entrepreneur' in regulated industries and as 'cops' in non-regulated industries -have implications for board composition and board effectiveness. We provide discussion of the implications in the context of corporate governance reforms in Japan.

ABOUT THE INCAS PROJECT

INCAS is a Marie Skłodowska-Curie Actions R.I.S.E funded project under the European Commission's H2020 Programme.

The project INCAS aims at creating a top-level research and advanced training network on institutional change in Asia, in comparative perspective with Europe. The coordinator, Ecole des Hautes Etudes en Sciences Sociales (France), promotes this network together with Oxford University (UK), Freie Universität Berlin (Germany), and in collaboration with Waseda University (Japan). The aim of the proposed mobility scheme is to give birth to a European consortium and network of faculties and advanced graduate students specialized in the comparative analysis of institutional change in Asia and Europe. The partners have chosen Japan as a reference point because of its comparability with Europe as shown by previous studies, its historical influence on development and further institutional changes in Asia, and the expertise accumulated within our research team.

Analyzing current economic dynamics in Japan and later expanding this analysis to other Asian countries promises to generate insights that might be help to better understand challenges for Europe and to prepare relevant policy proposals. Our purpose is to compare the results obtained in the case of Japan and few other Asian countries (South Korea, Taiwan, China, and possibly Thailand, after having checked the data availability), not only to previous results on Europe but also to original results we will get on European countries (primarily France -which will be our reference country in Europe -and then the UK, Germany, and Italy) in mobilizing new historical data and applying our theoretical framework.

Introduction

In recent decades, firms have been appointing more licensed professionals such as accountants and lawyers on their boards [START_REF] Litov | Lawyers and fools: lawyer-directors in public corporations[END_REF][START_REF] Naiker | Former audit partners on the audit committee and internal control deficiencies[END_REF]. But we do not know enough about what roles they play under what circumstances. Indeed, these 'professional-directors' (i.e. professionals on boards) play various roles with tensions between them, acting as gatekeepers ('cops') to reduce malfeasance [START_REF] Coffee | Gatekeepers: Professions and Corporate Governance[END_REF], as strategic advisors ('counsel') to add value to the firm [START_REF] Bagley | Winning legally: the value of legal astuteness[END_REF], or as promoters of creative solutions to new opportunities ('entrepreneurs') thus enhancing the firm's risk appetite [START_REF] Nelson | Cops, counsel, and entrepreneurs: constructing the role of inside counsel in large corporations[END_REF].

However, different streams of research have prioritized one role over another. In particular, the monitoring (or gatekeeping) role is emphasized in the corporate governance literature grounded in finance and economics [START_REF] Adams | The role of boards of directors in corporate governance: a conceptual framework and survey[END_REF][START_REF] Shleifer | A survey of corporate governance[END_REF]. By contrast, strategy scholars regard professionals as playing a counsel or entrepreneurial function, enhancing competitive advantage [START_REF] Bagley | Winning legally: the value of legal astuteness[END_REF][START_REF] Bagley | What's law got to do with it?:: integrating law and strategy[END_REF][START_REF] Hillman | Boards of directors and firm performance: integrating agency and resource dependence perspectives[END_REF]. Recent legal scholarship also focuses on the strategic value-adding role of lawyer-directors and lawyer-CEOs [START_REF] Henderson | Lawyer CEOs[END_REF][START_REF] Litov | Lawyers and fools: lawyer-directors in public corporations[END_REF].

Against this backdrop, the professions literature has not forgotten the multiple roles that professionals play in relation to corporate management (Empson, Muzio, Joseph Broschak, & Hinings, 2015;[START_REF] Nelson | Cops, counsel, and entrepreneurs: constructing the role of inside counsel in large corporations[END_REF]. This paper builds on this insight to develop theory and evidence on contingencies of varied professional roles and their impact on corporate performance. What are the circumstances under which professional-directors are likely to play one role rather than others? And what is the impact of each role on firm performance?

This study addresses this issue by building on, and modifying, the professions literature to apply to the specific situation of professionals on corporate boards. Professional-directors are under-studied in corporate governance literature (much more attention has gone to the role of CEOs and board independence for example) [START_REF] Adams | The role of boards of directors in corporate governance: a conceptual framework and survey[END_REF][START_REF] Johnson | Boards of directors: a review and research agenda[END_REF]. Professionals on boards are also understudied relative to their role as external advisory agents [START_REF] Coffee | Gatekeepers: Professions and Corporate Governance[END_REF] working at professional service firms (Empson et al., 2015;[START_REF] Greenwood | P2-form strategic management: corporate practices in professional partnerships[END_REF] or as in-house functional heads [START_REF] Morse | Executive Lawyers: Gatekeepers or Strategic Officers?[END_REF]. Moreover, given separate scholarship in accounting and law, there is a tendency to focus on lawyers only [START_REF] Litov | Lawyers and fools: lawyer-directors in public corporations[END_REF] or accountants only [START_REF] Naiker | Former audit partners on the audit committee and internal control deficiencies[END_REF]. This study attempts to combine the two fields to investigate the co-presence of more than one type of professional-directors.

We develop and test our hypotheses using a panel data of all publicly quoted companies in Japan during 2004-2015. Japan provides an ideal setting for analyzing board effectiveness given its compressed history of dramatic changes in corporate governance practices since the late 1990s. Lawyers and accountants have sat on corporate boards in the US and UK at least since the middle of the twentieth century. By contrast, they had been relatively absent on Japanese boards until 2000, but have grown rapidly since then. Not withstanding cynicism that their appointment is mere window dressing, we demonstrate that licensed professionals constitute an important subset of board members, many of whom are outside directors [START_REF] Miyajima | Understanding Change in Board Composition: Determinants of board composition and effects of outside directors (Japanese)[END_REF]. Moreover, strategy research on Japanese boards is rare (exceptions are [START_REF] Wiersema | Organizatinoal demography in Japanese firms: group heterogeneity, individual dissimilarity, and top mangaement team turnover[END_REF] and [START_REF] Wiersema | Executive succession: the importance of social capital in CEO appointments[END_REF]), a missed opportunity given that Japanese top management teams possess many of the attributes that the upper echelons approach emphasizes, such as behavioral integration [START_REF] Hambrick | Upper echelons theory: origins, twists and turns, and lessons learnt[END_REF] and shared responsibility (Aoki, Jackson, & Miyajima, 2007;[START_REF] Dore | Taking Japan Seriously[END_REF].

This study contributes to research on the contingent effects of executive backgrounds on organizational outcomes, by focusing on licensed professionals on corporate boards. Our study provides insights on contributions professionals make to strategic decision-making inside corporations, a neglected topic in the professions literature [START_REF] Sako | Professionals between market and hierarchy: a comparative political economy perspective[END_REF]. In particular, we identify professional-director roles along two distinct dimensions, the 'wise counsel' role based on their human and relational capital -what we call professional capital, and the 'cop' and 'entrepreneur' roles that result from their attitude to risk-taking. This study also draws implications for corporate governance generally and board composition specifically [START_REF] Adams | The role of boards of directors in corporate governance: a conceptual framework and survey[END_REF]. By clarifying in what ways licensed professionals contribute to board independence and effectiveness, we go beyond the agency role of directors to examine their roles in bringing resources and influencing strategy [START_REF] Daily | Corporate governance: decades of dialogue and data[END_REF][START_REF] Johnson | Boards of directors: a review and research agenda[END_REF].

The rest of the paper is structured as follows. The next section develops hypotheses concerning the contingent performance effects of professional-directors as cops, counsel, and entrepreneur. One contingency we examine is government regulation. Next, we justify why Japan provides an appropriate context for this study of the impact of professional-directors on company performance, present the data and findings, and address the endogeneity problem noted by [START_REF] Hambrick | Upper echelons: the organization as a reflection of its top managers[END_REF] and [START_REF] Hambrick | Upper echelons theory: origins, twists and turns, and lessons learnt[END_REF]. We then interpret our findings in light of other evidence (interviews with professional-directors and media coverage), discuss implications, and conclude.

Theory and hypotheses

Professionals on Corporate Boards

A central issue in our study is the varied impact of the presence of professional-directors on corporate performance. We begin with reviewing the professions literature to inform this question, in order to characterize a variety of roles that professional-directors play as a result of their training, expertise, and ethics.

Licensed professionals such as accountants and lawyers possess expert knowledge in a specific domain [START_REF] Abbott | The System of Professions: An Essay on the Division of Expert Labor[END_REF][START_REF] Teece | Expert talent and the deisgn of (professional service) firms[END_REF]. They work within professional service firms or in-house to contribute to improve the quality of strategic decisions companies make (Empson et al., 2015). At the same time, by virtue of their training and professional ethics inculcated through such training [START_REF] Dinovitzer | Professional Ethics[END_REF], professionals are predisposed to defend specific values which may be beneficial to board effectiveness. In particular, licensed professionals are bound by codes of ethics, which ensure that they act in the interest of their clients and the public at large. Accountants and auditors value objectivity and independence in the sense of being free from conflict of interest, and have formal obligations for public disclosure [START_REF] Coffee | Gatekeepers: Professions and Corporate Governance[END_REF]. Lawyers value autonomy, and are similarly suited to act as gatekeepers with respect to corporate management [START_REF] Coffee | Gatekeepers: Professions and Corporate Governance[END_REF][START_REF] Morse | Executive Lawyers: Gatekeepers or Strategic Officers?[END_REF].

Given their expertise and ethics, licensed professionals may be expected to play a variety of roles particularly when they work inside business corporations. This is concisely summarized in Nelson and Nielsen's study which identified three distinctive roles that in-house lawyers construct for themselves, as cops, counsel, or entrepreneurs [START_REF] Nelson | Cops, counsel, and entrepreneurs: constructing the role of inside counsel in large corporations[END_REF]. Cops limit their advice to legal mandates, and police business decisions that compromise legal risks. Counsel give legal advice to business managers in order to facilitate wise business decisions. By contrast, in-house lawyers acting as entrepreneurs participate in the pursuit of business opportunities, as they believe that such opportunities may be unlocked by innovative use of law. [START_REF] Nelson | Cops, counsel, and entrepreneurs: constructing the role of inside counsel in large corporations[END_REF] consider these roles as behavioral dispositions that the same lawyer adopts as he sees fit. That is, the same lawyer may play different roles in different circumstances. They also regard 'counsel' as the default role for most inside lawyers, though some are more predisposed to play the 'cop' role or the 'entrepreneur' role.

Building on their insight, this study goes beyond, and modifies, [START_REF] Nelson | Cops, counsel, and entrepreneurs: constructing the role of inside counsel in large corporations[END_REF] in four ways. First, the three roles applied to in-house lawyers will be applied to professionals who sit on corporate boards. While accountants and lawyers have different areas of expertise, they play overlapping and at times similar roles with respect to monitoring the corporations' financial performance and advising in business projects such as M&A deals ("…the world of corporate lawyers probably more closely borders on that of the accountant than that of the litigator/advocate" (Coffee, 2006: 193)). Being directors sitting on boards, professional-directors do not merely advise and monitor, but take on considerable responsibilities by participating in strategic decision-making.

Second, we seek to identify the firms' external environmental contingencies that facilitate and give opportunity for professional-directors to adopt one role rather than others. Professionals may have their individual disposition to adopt a certain role, given their perception about the legitimate role of professionals inside business corporations. But they have to be put in specific circumstances and given corresponding opportunities to be able to enact that role in practice. One prominent approach is to identify incentives (financial or positional) to allocate professional time to these roles. For example, general counsel (Chief Legal Officers) may be compensated in stock options, and have a financial incentive to trade off gatekeeping in favor of greater risk-taking [START_REF] Morse | Executive Lawyers: Gatekeepers or Strategic Officers?[END_REF]. General counsel who join senior management are also found to increase firm credit risk [START_REF] Ham | The association between corporate general counsel and firm credit risk[END_REF]. In our study, we hold these positional and financial incentives relatively constant, as professionals we examine are all on boards and tend to be paid a flat fee as non-executive directors.1 An alternative approach taken here is to identify environmental contingencies, such as the market and non-market (e.g. regulatory) conditions in which the firm is situated. The alignment of professional roles to the environment is under-explored and is a focus of our study.

Third, we theorize and empirically demonstrate the specific impact of each professional role on corporate performance. Here, we take a cue from the upper echelons theory [START_REF] Hambrick | Upper echelons theory: an update[END_REF][START_REF] Hambrick | Upper echelons: the organization as a reflection of its top managers[END_REF], which examines top management team (TMT) characteristics as proxies for the executives' cognitive and psychological processes [START_REF] Hambrick | Upper echelons theory: an update[END_REF] and link them to firms' strategic direction and performance [START_REF] Finkelstein | Power in top management teams: dimensions, measurement, and validation[END_REF][START_REF] Finkelstein | Top-management-team tenure and organizational outcomes: the moderating role of managerial discretion[END_REF][START_REF] Hambrick | The influence of top management team heterogeneity on firms' competitive moves[END_REF][START_REF] Tihanyi | Composition of the top management team and firm international diversification[END_REF][START_REF] Wiersema | Top management team demography and corporate strategic change[END_REF]. Building on these studies, we focus on the specific case of links between professional expertise as one type of TMT characteristics and corporate performance, mindful of the need to unpack the endogeneity problem. The possibility of two-way causation, that TMT characteristics are both an antecedent and a consequence of firm outcomes, was highlighted upfront by [START_REF] Hambrick | Upper echelons: the organization as a reflection of its top managers[END_REF], and remains a major methodological challenge [START_REF] Carpenter | Upper echelons research revisited: antecedents, elements, and consequences of top Management team composition[END_REF].

Last but not least, we identify two separate dimensions, the professional-capital dimension and the risk-taking dimension, which we assert are necessary to fully characterize the varied roles of professional-directors. The professional-capital dimension is about the quality of professionals' human capital and relational capital, which influence the quality of professional advice and judgment in specific situations. The risk-taking dimension, by contrast, is about the extent to which professional-directors influence the board's risk appetite regardless of the quality of professional capital. Unpacking the two dimensions imply that the varied professional roles of 'cop, counsel, entrepreneur' do not lie on a single spectrum. We develop hypotheses for each of these dimensions below.

Professional-Directors as 'Wise Counsel'

Firms select board members for their capacity to provide 'wise counsel' to enable making strategic decisions that enhance sustainable competitive advantage. The wisdom of any counsel derives from essential management resources, which may be broken down into human capital [START_REF] Becker | Human Capital[END_REF] and relational capital [START_REF] Kale | Learning and protection of proprietary assets in strategic alliancees: building relational capital[END_REF][START_REF] Nahapiet | Social capital, intellectual capital, and the organizational advantage[END_REF]. Human capital is about expertise and experience, which is applied to make effective strategic decisions. Relational capital is the relational aspect of social capital and is derived from personal relations that professionals develop over time [START_REF] Adler | Social capital: Prospects for a new concept[END_REF], including with other professionals, policy-makers, and regulators. This enables the firm to better control its external environment [START_REF] Boyd | Corporate linkages and external environment: a test of the resource dependence model[END_REF][START_REF] Hillman | The resource dependence role of corporate directors: strategic adaptation of board composition in response to environmental change[END_REF][START_REF] Hillman | Boards of directors and firm performance: integrating agency and resource dependence perspectives[END_REF][START_REF] Pfeffer | Size and composition of corporate boards of directors: the organization and its environment[END_REF][START_REF] Pfeffer | The external control of organizations: A resource dependence perspective[END_REF]. We argue that wise counsel derives from professional-directors' capacity to combine their human capital and relational capital.

Licensed professional-directors bring specific kinds of expertise -e.g. accounting or legal -which is combined with their knowledge of the company's business operations and their environment to arrive at board-level decisions. Prior research in resource dependence tradition focused on relational capital, and found evidence of board-environment alignment. In particular, companies in regulated and capital intensive industries tended to have lawyers and finance specialists [START_REF] Pfeffer | Size and composition of corporate boards of directors: the organization and its environment[END_REF] and outside directors with backgrounds in politics or law [START_REF] Agrawal | Do some outside directors play a political role?[END_REF] on their boards. Professional-directors may help firms to shape the environment in their favor by influencing government regulations [START_REF] Pfeffer | The external control of organizations: A resource dependence perspective[END_REF]. Professionals might also work alongside ex-politicians on corporate boards to advance political connections for the firm [START_REF] Agrawal | Do some outside directors play a political role?[END_REF][START_REF] Helland | Regulation and the evolution of corporate boards: monitoring, advising, or window dressing?[END_REF][START_REF] Lester | Former government officials as outside directors: The role of human and social capital[END_REF]. While these studies provide systematic evidence of board-environment alignment, the performance impact of such alignment is presumed but not tested (an exception is [START_REF] Hillman | Politicians on the board of directors: Do connections affect the bottom line[END_REF]).

By contrast, prior research in law and strategy has focused on human capital, arguing that professional-directors' expertise add to the quality of strategic decisions made. Studies in this tradition theoretically and empirically demonstrate the impact on enhancing firm competitive advantage. In particular, Bagley argues that 'legally astute' firms have top management teams with an absorptive capacity to take legal advice into account when making strategic decisions [START_REF] Bagley | Winning legally: the value of legal astuteness[END_REF]. Empirical evidence also exists that lawyer-directors [START_REF] Litov | Lawyers and fools: lawyer-directors in public corporations[END_REF] and lawyer-CEOs [START_REF] Henderson | Lawyer CEOs[END_REF] enhance corporate valuation. This strand of research however gives no regard to the external environment nor relational capital, thus ignores board-environment alignment.

Professional-directors can be 'counsel' in the sense of providing professional advice in specific business context, with a view to enhancing the firm's long-term competitive advantage. Financial compliance for listed companies, disclosure rules, and accounting regulations have become more complex, leaving significant scope for interpretation. In this context, professional-directors apply their expert knowledge to interpret the relevant laws and regulation, and provide advice on how best to comply in specific situations. Given much scope for interpreting laws and regulations in specific circumstances to arrive at case-by-case solutions, the impact of acting as 'counsel' applies equally to all sectors. The test of the claim that the counsel has been wise is in its impact on corporate valuation and profitability. Moreover, as their knowledge about the company's internal operations and its environment deepens with tenure, professional-directors become more effective in applying their human and relational capital over time.

These arguments lead us to our first hypothesis:

Hypothesis 1A (Counsel). Professionals on boards bring functional benefits to companies, increasing profitability and corporate valuation.

Hypothesis 1B (Counsel). Professional-directors with longer tenure bring greater functional benefits to companies than those with shorter tenure, increasing profitability and corporate valuation more.

Professional-Directors as Cops vs Entrepreneurs

Professional-directors sit on corporate boards, and as such go beyond giving advice. They are party to the decisions boards make. This section addresses the question of what determines the professional-directors' opportunities to influence the risk appetite on the boards on which they sit. Accountants and lawyers who sit on boards are guardians of financial and legal risks. Strategic decisions, to acquire a company or to establish overseas operations for instance, involve balancing judgments about business opportunities against these risks. At two ends of the risk-taking spectrum, risk-averse 'cops' tend to trump these business opportunities, while 'entrepreneurs' endorse or at times enhance the board's risk appetite.

As applied to professionals at large, in-house lawyers act as 'cops' when they limit their advice to legal mandates [START_REF] Nelson | Cops, counsel, and entrepreneurs: constructing the role of inside counsel in large corporations[END_REF], and similarly accountants acting as 'cops' limit their work to audit and financial regulatory compliance. When professional-directors function as 'cops' , they act as gatekeepers who promote compliance and monitor management to reduce malfeasance [START_REF] Coffee | Gatekeepers: Professions and Corporate Governance[END_REF][START_REF] Morse | Executive Lawyers: Gatekeepers or Strategic Officers?[END_REF]. Cops may be guardians of financial reporting compliance, reducing compliance breaches in accounting and insider trading regulations. They may also monitor a broader variety of management behavior in order to enhance internal controls of corporations. Cops essentially safeguard shareholders' interests, contributing towards lowering agency costs of monitoring managerial behavior, particularly when such agency costs are high in the face of dispersed share ownership.

An important environmental factor that may influence the extent to which professional-directors act as 'cops' is the nature of government regulation. Corporate boards in regulated industries require professionals to advise on how to comply with regulations, and to avoid infringements and subsequent litigation [START_REF] Hillman | Politicians on the board of directors: Do connections affect the bottom line[END_REF]. Of course, there are more gates to be kept in regulated than in less regulated industries. In regulated industries, however, all board directors, professional and non-professional, are keenly aware of the need to comply. Moreover, professionals (including internal and external auditors, and external and in-house lawyers) act as 'cops' to conduct due diligence in regulated sectors. By the time business proposals are placed on board agenda, there is little scope remaining for professional-directors in regulated industries to add further value as 'cops' .

By contrast in relatively unregulated industries, professional-directors are more likely to be put on the spot to act as gatekeepers given greater discretion in management decisions in such environment. 'Cops' are watchdogs that reduce downside risks, and their risk-averse disposition is given greater scope for application in less regulated industries. This risk-averse stance will be reflected in corporate performance in the form of reduced volatility in profitability and stock returns. Thus, our second hypothesis is as follows.

Hypothesis 2 (Cops). Professionals on boards act as cops, reducing volatility in profits and stock returns, especially in less regulated industries.

At the other end of the risk-taking spectrum, professional-directors may act as 'entrepreneurs' . Lawyers and accountants are guardians of legal risk and financial risk respectively. As such, they may become naysayers when they see new business opportunities that would lead to taking greater-than-acceptable risks. But professionals acting as 'entrepreneurs' find creative solutions to business deals, endorsing or effecting an increase in the board's risk appetite, thus realizing both upside and downside risks. [START_REF] Nelson | Cops, counsel, and entrepreneurs: constructing the role of inside counsel in large corporations[END_REF] define entrepreneurial professional roles, applied to in-house lawyers, as giving priority to business objectives than legal analysis, and attribute the entrepreneurial tendencies of in-house lawyers to their efforts to 'adapt their images and lawyering styles to the prerogatives of contemporary management' (abstract). They go onto describe how entrepreneurial lawyers see 'law itself as a source of profits and an instrument to be used aggressively in the marketplace ' (p.466). This view of law as a mechanism through which major transactions are executed applies to M&A deals, new market entry, and venture funding. More broadly, professional-directors may regard their knowledge in accounting or law as enabling the creation and implementation of novel options in structuring business contracts, enhancing the value of intangible assets (such as patents and brands), and pushing the boundary of legality via taking advantage of legal loopholes [START_REF] Bagley | What's law got to do with it?:: integrating law and strategy[END_REF].

With respect to the firm's external environmental factor, the degree of regulation is relevant. The relative absence of regulation may predispose all board members, including professional-directors, to veer towards becoming 'entrepreneurs' . However, professional-directors can make a material difference especially at companies in regulated sectors, where the board may look to them to anticipate and manage financial and legal compliance in highly risky projects. Thus, the endorsement of risk-taking by professional-directors may lead firms to take riskier decisions than in their absence. The above argument leads us to the third hypothesis, as follows:

Hypothesis 3 (Entrepreneurs). Professionals on boards act as entrepreneurs, increasing volatility in profits and stock returns, especially in regulated industries.

Our theoretical and empirical approach ultimately identifies the professional role as revealed via its impact on corporate performance. Thus, the wise 'counsel' role is manifested in investment decisions that lead to higher profit and corporate valuation. The wisdom derives from putting professional capital, combining professional-directors' human capital and relational capital, in the service of specific contexts of the firm and the environment. Separate from this professionalcapital dimension, the other two roles lie along the risk-taking dimension. At one extreme, the 'cop' role is most clearly manifested in corporate performance resulting from risk-averse decisions, such as low volatility in profits and stock returns. At the other extreme, the 'entrepreneur' role is manifested in much risk-taking, leading to high volatility in profits and stock returns.

Data & Methods

To test our hypotheses, we focus on publicly quoted companies in Japan. Constructing our dataset involved matching data from three sources, namely Nikkei Needs CGES (Corporate Governance Evaluation System), Directory of Directors (Yakuin shikiho) by Toyo Keizai, and Development Bank of Japan (DBJ) data. We start from the 2004 list of listed firms and construct an unbalanced panel of listed firms from 2004 to 2015. We chose to start the data in 2004 because some corporate governance variables we employ are available only from 2004. After dropping observations with missing data, our final sample consists of 39877 firm-year observations during the 2004-2015 period. Before describing the variables for analysis, we highlight substantial changes in corporate governance practices in Japan just prior to and during the period of our study, as a background to why and how professionals came to be appointed on corporate boards in Japan.

Changes in Corporate Governance Practices in Japan

Japan provides an ideal setting for analyzing the impact of corporate governance reforms. More specifically, professionals such as lawyers and accountants have sat on US and UK corporate boards at least since the middle of the twentieth century. By contrast, professional-directors had been relatively absent on Japanese boards until 2000, but have grown rapidly since then. This compressed contemporary history enables us to examine the impact of appointing a professional for the first time on corporate performance. But why have Japanese firms come to appoint professionals on their boards with this timing?

A confluence of factors has led to a dramatic reduction in board size and the emergence of outside directors in Japan. During the 'lost decade' of the 1990s, corporate leaders came to voice their concern over the lackluster performance of Japanese companies. This led to a number of legislative and non-legislative responses. Among the former, the pure holding company became legal again in 1997 after 50 years of banning this corporate form. Corporate boards at the holding company level were expected to focus on group-wide strategy. The adoption of consolidated accounts since 1999 also facilitated providing boards with group-wide overview in an era when Japanese companies became more diversified and international [START_REF] Miyajima | Corporate Governance Reform in Progress and the Regeneration of Japanese Firms[END_REF].

Another legislative push came in the form of the 2003 revision of the Commercial Code and the subsequent 2006 revision of the Company Law, which gave the option for quoted companies to introduce a committee system (shimei iinkai tou setchi gaisha). The committee system refers to the establishment of the audit, nomination, and remuneration committees for which each must have at least 3 members of whom the majority must be outside directors. The diffusion of this committee system has been slow. In 2017, 83.4% of all quoted companies (72.9% of companies quoted on TSE First Section) did not have a nomination committee; and 81.5% (70.1% of TSE First Section companies) did not have a remuneration committee (JPX, 2017). However, awareness of this system is thought to have promoted the appointment of outside directors. This bodes a major shift for Japanese corporate boards traditionally dominated by internally promoted top managers along with directors sent from main banks and group companies. According to Saito (2011), three-quarters of the largest 500 firms in Japan had a board composed entirely of inside directors in 1997. The proportion of firms listed in the first section of Tokyo Stock Exchange with at least one outside director rose gradually to 35% in 2005 [START_REF] Saito | Determinants of director board and auditor board composition: evidence from Japan[END_REF] and 48.7% in 2010, then jumped from 64.4% in 2014 to 95.8% in 2016 (JPX, 2017).

Among the non-legislative responses, two are notable. First, in the past, Japanese companies were marked by crossshareholding among companies. But following the onset of the banking crisis in 1997, companies and banks swiftly dissolved their cross-shareholdings, while domestic and foreign institutional investors managing investment trusts or pension funds emerged as prominent shareholders after 2000. Consequently, the proportion of cross-shareholdings in total shares declined from 15.3% in 1995 to 9.0% in 2008, and the proportion of shares held by foreigners increased from 15.0% in 2004 to 26.7% in 2015 [START_REF] Miyajima | Ownership structure and corporate governance: has an increase in institutional investors' ownership improved business performance? Public Policy Review[END_REF][START_REF] Miyajima | The unwinding of cross-shareholding in Japan: causes, effects, and implications[END_REF][START_REF] Miyajima | Diversification and outlook of ownership structure: unwinding and 'resurgence' of cross-shareholding and the role of foreign investors[END_REF]. Both factors lowered the protection from stock market pressures on which many Japanese companies relied. Second, starting with Sony's initiative in 1997, major companies created the executive officer (shikko yakuin) system with the aim of separating strategy from execution. Specifically, the board was to focus on agile decision-making about company-wide strategic directions, while executive officers attended to day-to-day execution at each business operation [START_REF] Kubo | Corporate Governance: How Should Managerial Change and Reward Be?[END_REF]. This led to a dramatic decline in board size, for example from 38 directors in 1997 to 10 in 1998 at Sony, and from 58 in 2002 to 26 in 2003 at Toyota. Toyota further reduced its board size to 16 directors in 2013, of whom 3 were outside directors and 1 foreign director.

Our data reflect these shifts in board size and structure. In our sample, the average board size declined from 10.9 directors in 2004 to 7.5 directors in 2015. In addition, the proportion of companies in our sample with outside directors increased from 23.5% in 2004 to 64.8% in 2015 (and 88.6% in 2016). In the past, outside directors were not truly outsiders, as they were sent from main banks and parent companies [START_REF] Kubo | Corporate Governance: How Should Managerial Change and Reward Be?[END_REF]. More recently, they are more genuinely independent outsiders, including professionals who are the focus of our study. Securing outside directors has proven difficult [START_REF] Miyajima | Corporate Governance Reform in Progress and the Regeneration of Japanese Firms[END_REF], and increasing the ratio of outside to inside directors remains a top concern in improving board composition (Deloitte, 2017). In this context, professionals may be considered one pool of talent which corporate boards can tap into.

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Insert Table 1 about here ----------------------------------

Dependent Variables

Our study tests the three hypotheses with various measures of corporate performance as the main dependent variables (see Table 1 for variable descriptions). Following the literature, we chose three indicators of firm performance for this study. The data source is the Nikkei Needs CGES (Corporate Governance Evaluation System).

Return on assets.

Our first dependent variable is return on assets, Roa, which is calculated using the usual method of returns divided by total assets for firm i in time t.

Tobin's Q. The second dependent variable is calculated as the ratio of the total market value of the firm divided by the total asset value for firm i in time t.

Volatility of stock returns. We calculate a measure of the volatility of stock returns. The variable vol3_0 is calculated as the standard deviation of daily stock returns over a three-year period (i.e. from t-3 to t) for firm i in time t.

Independent Variables

We construct our independent variables on professionals by using the Directory of Directors (Yakuin shikiho) published by Toyo Keizai. This directory lists all the members of the board of publicly listed companies in Japan. These board members are either directors (torishimariyaku) or auditors (kansayaku), and directors may be either executive (inside) (shanai) or non-executive (outside) (shagai). The directory also provides details concerning each director or auditor, including his or her educational and professional qualifications and work experience. We focus on whether or not a director is one of two professional types requiring a license to practice: a lawyer (bengoshi), or an accountant (kaikeishi).

Professionals. We calculate a variable ratio_professional2_d as the proportion (percentage) of professionals (lawyers and accountants) to the total number of directors on the board for firm i in year t. The proportion of professionals to the total number of directors increased from 0.41% in 2004 to 2.69% in 2015 (see Figure 1). The proportion of companies with either lawyers and/or accountants on their boards also increased from 2.67% in 2004 to 17.09% in 2015 (see Figure 2). In some of our analyses, we also make a distinction between ratio_professional2_d_in, the ratio of licensed professionals who are executive directors, and ratio_professional2_d_out, the ratio of licensed professionals who are non-executive directors.

Lawyers. We calculate a variable ratio_lawyer_d as the percentage of lawyers to the total number of directors on the board for firm i in year t. As shown in Figure 1, the ratio of lawyers increased from 0.18% in 2004 to 1.64% in 2015. Moreover, as shown in Figure 2, the proportion of companies that have at least one lawyer on their boards increased from 1.40% in 2004 to 11.59% in 2015. In some of our analyses, we also make a distinction between ratio_lawyer_d_in, the ratio of lawyers who are executive directors, and ratio_lawyer_d_out, the ratio of lawyers who are non-executive directors.

Accountants. We calculate a variable ratio_accountant_d as the proportion (percentage) of accountants to the total number of directors and auditors on the board for firm i in year t. As shown in Figure 1, the ratio of accountants increased from 0.22% in 2004 to 1.04% in 2015. Moreover the proportion of companies that have at least one accountant on their boards increased from 1.32% in 2004 to 6.66% in 2015 (see Figure 2). In some of our analyses, we also make a distinction between ratio_accountant_d_in, the ratio of accountants who are executive directors, and ratio_ accountant_d_out, the ratio of accountants who are non-executive directors.

- ---------------------------------Insert Figures 1 and2 about here ----------------------------------

Defining Heavily Regulated and Less Regulated Industries

In order to test our hypotheses H2 and H3, we subdivide our sample into two groups, those firms in heavily regulated industries and those in less regulated industries, following [START_REF] Hillman | Politicians on the board of directors: Do connections affect the bottom line[END_REF]. In our Japanese sample, heavily regulated industries are Foods, Chemicals, Pharmaceuticals, Oil & Coal Products, Electric Power & Gas, Information & Communication, Banks, Securities & Commodity Futures, Insurance, Other Financial Business, and Real Estate. Less regulated industries consist of Machinery, Electrical Appliances, Transportation Equipment, Precision Instruments, and Wholesale and Retail Trade. These industrial sector definitions are based on the one used in Tokyo Stock Exchange, which identifies 33 separate sectors. See Appendix 1 for how the 33 sectors correspond to our classification of regulated and less regulated industries.

Control Variables

We use seven control variables in our main regressions, as follows.

Firm size. We indicate firm size by using a variable lnass1, which is the natural log of the total asset of the firm. The data source is the Development Bank of Japan (DBJ) data. Large firms are likely to have larger boards. They may also have better access to professionals on their board. Board size. We deploy a measure of board size, Brd_num which counts the total number of directors. Board size may lead to effective decision-making due to the heterogeneity of expertise and experience on the board, but it may also have a deleterious effect due to difficulty in reaching consensus.

Tokyo Stock Exchange listing.

A dummy variable l_tky_p takes the value of 1 if the firm is listed on the First Section of Tokyo Stock Exchange, 0 otherwise. This dummy captures firm size, but also high incidence of adopting good corporate governance practices [START_REF] Jpx | White Paper on Corporate Governance[END_REF].

Entrenchment. We wish to distinguish between firms run by a top management team that is entrenched in the firm they run, and those firms led by salaried top managers. Here, we deploy a common measure of entrenchment, ent, which calculates the proportion of total shares owned by members of the board. A high share is an indicator of the likely presence of a founder-CEO.

Institutional and foreign investors.

Another control variable is the presence of institutional and foreign shareholders many of whom are institutional investors. We calculate a variable inst as the proportion of the firm's total shared held by institutional investors, and a variable frgn as the proportion of the firm's total shares owned by foreign shareholders. Foreign and institutional shareholders are associated with more rigorous corporate governance standards, including the use of outside directors who may be professionals [START_REF] Ferreira | The colors of investors' money: the role of oinstitutional investors around the world[END_REF][START_REF] Miyajima | Ownership structure and corporate governance: has an increase in institutional investors' ownership improved business performance? Public Policy Review[END_REF].

Sector median volatility. Our last control variable is a measure of stock return volatility when the dependent variable is other than stock returns. We calculate a variable sector_vol_median as the median value of stock return volatility measure, vol3_0, for each of the 33 sectors identified by Tokyo Stock Exchange.

Instrumental Variables

As we explain below in the section on Econometric Specifications, we consider four variables as instrumental variables. Litigationpf is the sector mean of the number of intellectual property litigation cases per firm in 2013, using the annual Intellectual Property Activity Survey by the Japan Patent Office. We chose the 2013 (rather than a more recent) survey as it contains data on IP litigation cases. Rightspf, from the same survey, is the sector mean of the number of intellectual property rights (including patents, utility model patents, design rights, copyrights and trademarks) per firm. Firms are classified into 18 sectors in the Intellectual Property Activity Survey while our sector code consists of 33 sectors (see Appendix 1). We match each sector in the Intellectual Property Activity Survey to the most appropriate of the 33 sectors2 . We also employ two further instruments, namely Randd_ratio2, the proportion of research and development cost to sales, and adv_ratio2, the ratio of advertisement cost to sales. Both variables are calculated using DBJ data.

Tables 1 presents the variable descriptions and Table 2 the descriptive statistics. Table 3 presents the correlations matrix.

- ---------------------------------Insert Tables 1, 2 and 3 about here ----------------------------------

Econometric Specifications

Hypotheses H1, H2, and H3 are concerned with the impact of the presence of professionals on the board on firm performance. Given that our dependent variables are continuous variables, the choice of Ordinary Least Squares (OLS) with robust standard errors clustered at the firm level is appropriate.

Our study however has a number of characteristics that render alternative estimation methods desirable. In particular, our hypotheses involve the possibility of two-way causation, with the number of professionals being determined in part by firm performance. In order to address this endogeneity issue, we employ two approaches, the use of Instrumental Variables and the Difference-in-Differences approach [START_REF] Roberts | Endogeneity in Empirical Corporate Finance[END_REF]. First, we employ an Instrumental Variables procedure to estimate the presence or absence of professionals using four instruments, litigationpf, rightspf, randd_ratio2 and adv_ratio2, and then use the estimated values for the main regressions. These instruments are considered to affect the presence of professionals positively, but do not affect our dependent variables in our main regressions.

Second, we adopt a Difference-in-Differences approach, used also by [START_REF] Morse | Executive Lawyers: Gatekeepers or Strategic Officers?[END_REF]. In this approach, we focus, not on the presence of professionals, but on the first introduction of professionals on corporate boards. This enables us to examine performance changes before and after the introduction. We then compare the difference between performance changes at firms with the introduction and performance changes at those without, one year after the introduction and in subsequent years.

Analysis and Results

Professionals and corporate performance

Table 4 presents the results of our analysis for the impact of professionals on corporate performance for the whole sample. Looking at models (1) and (3), the impacts of professionals on ROA and Tobin's Q are both positive and significant, supporting Hypothesis 1A. In order to address the two-way causation problem, we also run Instrumental Variable regressions. In models (2) and ( 4), the impacts of professionals on both measures of corporate performance remain positive and significant, and their magnitude increases.

- ---------------------------------Insert Table 4 about here ----------------------------------Looking at the control variables we find effects broadly consistent with our expectations. In particular, listing in the First Section of Tokyo Stock Exchange is associated with higher ROA and Tobin's Q, as is the presence of institutional investors in the firm's share ownership. This is hardly surprising given that these two features are associated with better corporate governance. Board size is associated with positive corporate performance, but total asset as an indicator of firm size is negatively associated with corporate performance. One interesting result is the variable on entrenchment: the higher the extent of shares owned by board directors, the higher the corporate performance.

Next, Table 5 presents the Difference-in-Difference analysis results, focused on the first introduction of professionals on company boards. As shown, appointing a professional on boards leads to a premium on ROA from the first year after the appointment [0,1]. The premium on ROA is increasing and becomes significant from the third year after the appointment [0,3]. This provides support for our hypothesis H1B. The effects on Tobin's Q, however, were not significant.

- ---------------------------------Insert Table 5 about here ----------------------------------

Professionals in heavily regulated vs less regulated industries

Table 6 presents our regression results for testing Hypotheses 2 and 3. Focusing on instrumental variable regression results, we compare models ( 5) and ( 6). They demonstrate that the impact of professionals on stock return volatility is positive and significant for firms in heavily regulated industries, in support of H2, but negative and but significant in less regulated industries in support of H3. Among the control variables, perhaps the most interesting result is that entrenchment (high percent of shares held by directors) significantly increases volatility, an indicator of entrenched managers' willingness to take greater risks.

Table 7 examines the impact of the first introduction of professionals on stock return volatility using the difference-indifference approach. The introduction of a professional on boards leads to a higher premium on volatility increases, but it is significant only in regulated sectors and not in less regulated sectors.

- ---------------------------------Insert Tables 6 and7 about here - ---------------------------------

Additional Analyses

We perform additional analyses in order to discuss extensions of our results and to consider alternative explanations. In particular, we discuss here whether professional-directors as 'insiders' (i.e. executive directors) or as 'outsiders' (i.e. nonexecutive directors) make a difference to performance outcomes. We find that the performance impact as measured by Tobin's Q is positive and significant for inside professional-directors but not for outside professional-directors (the results are inconsistent across different estimations for the impact on ROA) (see Appendix 2).

This result is consistent with the explanation that outside directors provide independent voice and thus improve the quality of top management decisions, but there is a trade-off, as they tend to be less knowledgeable about the company and its environment than inside directors. By contrast, inside directors are steeped in company-specific knowledge but lack independence. Our results suggest that inside professional-directors can combine the best of both worlds. Professional-directors who are insiders are independent by virtue of having a professional license to practice, which makes them able to challenge the CEO's decisions without being beholden to the company for jobs. They are also knowledgeable about the company by virtue of being insiders. Thus, the voice exercised by independent insiders may be more effective than that by non-executive outside directors per se.

Discussion

This study explored the contingent effects of professionals on company boards, by focusing on two types of professionals, namely accountants and lawyers. Its main aim was to develop and test a set of hypotheses that modified the professions literature to apply to corporate governance. Our data on quoted companies in Japan provided an ideal context for testing the introduction, as well as the presence, of licensed professionals on corporate boards and their varied performance impacts.

Our theory and findings provide insights to a key question in strategic management, that is, the role of professionals as a specific type of resource in explaining performance heterogeneity and (sustainable) competitive advantage. We find robust evidence that the presence of licensed professionals on company boards matters for company performance in two distinct ways. First, the presence of professional-directors enhances profitability and corporate value, which we interpret as evidence of their role as 'wise counsel' . Second, distinct from this first performance effect, the presence of professional-directors leads to higher stock return volatility in regulated industries, evidence of their role as 'entrepreneurs' . By contrast, the presence of professional-directors lowers stock return volatility in less regulated industries, which is evidence of their role as 'cops' .

Theoretical Implications

Our key theoretical contribution lies in clarifying in what ways the presence of professionals on company boards affect the bottom line. To date, functional backgrounds of board members have been captured either by taking note of the overall heterogeneity on the board [START_REF] Murray | Top management team heterogeneity and firm performance[END_REF], or by studying one type of professional (accountant or lawyer) at a time [START_REF] Bagley | Winning legally: the value of legal astuteness[END_REF][START_REF] Litov | Lawyers and fools: lawyer-directors in public corporations[END_REF][START_REF] Naiker | Former audit partners on the audit committee and internal control deficiencies[END_REF]. The impact of professional-directors on corporate performance has been studied using a non-contingent framework, in which their presence improves competitive advantage under all circumstances [START_REF] Bagley | Winning legally: the value of legal astuteness[END_REF] We build our theory beyond these approaches in a number of ways.

First, the three professional roles, 'cop, counsel, and entrepreneur' identified by [START_REF] Nelson | Cops, counsel, and entrepreneurs: constructing the role of inside counsel in large corporations[END_REF] lie not on a single spectrum but along two separate dimensions which we call the professional-capital dimension and the risk-taking dimension. Professional capital consists of human capital [START_REF] Becker | Human Capital[END_REF] and relational capital [START_REF] Moran | Structural vs relational embeddedness: social capital and managerial performance[END_REF], which influence the quality of professional advice and judgment in specific situations. Risk-taking is about the professional-directors' own attitude to taking business risk, which in turn influence the board's risk appetite regardless of their professional capital. Unpacking the two dimensions enables us to identify the 'wise counsel' role in relation to the professional-capital dimension, and the 'cop' and 'entrepreneur' roles in relation to the risk-taking dimension. This typology is novel in relation to the professions literature for which the notion of professional capital comes naturally but not the idea of risk-taking by professionals themselves. By focusing on professional-directors, our theory regards professionals not as mere advisors of financial or legal risks, but as participants in taking (or decisions about taking) business risks.

Second, which role professional-directors are likely to adopt depends on the external environment of the firm, as well recognized by resource dependence theory. We add insight beyond resource dependence theory by linking the adoption of a specific role along the risk-taking dimension to corporate performance outcomes. In particular, contrasting external environments into regulated vs less regulated, we identify the former (regulated) as an opportune environment for professional-directors to demonstrate their function in endorsing greater risk-taking, that is, acting as 'entrepreneurs' . By contrast, the latter (less regulated) environment facilitates professional-directors to manifest their role in restraining risk-taking, that is, acting as 'cops' . Of course, the adoption of specific professional roles is influenced by other factors including personal disposition influenced by experience (e.g. career trajectory in external vs in-house work), or by incentives (e.g. performance-related compensation). But external environment provides an additional important contingency.

Implications for Corporate Governance in Japan

In the context of debates about corporate governance in Japan (and elsewhere), our study provides a number of insights for corporations and professionals. We discuss two topics below: the independence of directors and the material impact of professional-directors.

As discussed earlier, the independence of board directors is a key issue in policy and practice in Japan. Not so long time ago, most large corporations had large boards composed entirely of inside directors who were promoted from within. Today, nearly all (95.8% in 2016) of the firms listed in the first section of Tokyo Stock Exchange have at least one outside director (JPX, 2017), and the proportion is not much less (88.6% in 2016) in our sample of all quoted companies in Japan. In this context, it is important to clarify in what ways professional-directors might contribute to board independence.

Conventional account clarifies who is putting pressure on Japanese companies to appoint outside directors. Institutional investors and foreign investors loom large in this discussion. These investors expect independent voice by outside directors to challenge insider-dominated top management, with a view to improving the quality of strategic decisions. But our study demonstrates that independence may be grounded in more than one source. One well-recognized source of independence lies in the non-executive status of directors, that is, outside directors are not beholden to the company for livelihood due to the availability of alternative sources of compensation.

Further, an important basis for independence for professional-directors is their ethics and the professional license. Through some interviews of professional-directors, we note a strong sense among them of having cultivated distinctive cognitions, values and perceptions as accountants or lawyers, which in turn affect their strategic orientation [START_REF] Carpenter | Upper echelons research revisited: antecedents, elements, and consequences of top Management team composition[END_REF]. Professional training as lawyer, for example, is not just about acquiring legal knowledge and expertise, but also about learning how to think like a lawyer (with emphasis on objectivity and integrity) and act like a lawyer. Moreover, some interviewees considered the possession of a professional license as accountant or lawyer as a passport to alternative employment, which gives them the freedom to challenge the board without fearing adverse effects on their livelihood. Moreover, as noted earlier, inside professional-directors, though they are few in number, can remain independent by virtue of having a professional license to practice. 3 These independent insiders, armed with better access to company information, may well be more effective than non-executive outside directors per se, in accelerating corporate restructuring or changes in the company's strategic direction. 4 These accounts demonstrate that the effectiveness of board directors are not just about the structural aspects (outsider vs insider) of boards.

Second, there exists considerable skepticism about the material impact of board diversity and the quality of work carried out by lawyers and accountants (and academics!) who are asked to become outside directors. Skepticism about professionals who failed to be effective gatekeepers in the wake of Enron and WorldCom is well-taken [START_REF] Coffee | Gatekeepers: Professions and Corporate Governance[END_REF]. Given this background, risk-taking by professionals tends to be regarded as somewhat 'unprofessional' , when they become agents of self-interested top managers rather than shareholders as principal.

There also exists skepticism about whether Japanese professionals can provide independent voice. In audit and accounting, for example, auditors tended to follow the lead of banks to trust what corporate clients provided in their accounts [START_REF] Matsubara | Change and continuity of accounting professionals in Japan: interpretive policy analysis perspective[END_REF]. By the 2000s, they were expected to provide more rigorous auditing services as the government (Financial Services Agency in particular) changed its policy. The role of accountant-directors must be interpreted with this recent contextual change in mind. If policy shifts were not reflected in business practice, then accountant-directors would have had no material impact on corporate practice and performance.

Such skepticism not withstanding, out study demonstrates that professional-directors are not mere window-dressing but have had material impacts on risk-taking and corporate performance under certain circumstances. Although specific cases of attributing direct impact of professional-directors are hard to come by, the case of a real estate rental company Apaman Shop is illustrative. 5 In this case, a major investor sued the company directors for neglecting their obligation to pay good attention before arriving at the decision to merge a subsidiary into another subsidiary. The court cited the company's record that it sought advice from a lawyer, as evidence to support its ruling that the directors did not neglect their obligation when they decided on this merger plan.

Limitations & Future Research

Our study has a number of limitations we wish to highlight. First, by arbitrarily dividing industrial sectors into heavily regulated and less regulated industries, we have skirted over the exact nature of regulations and their enforcement. Further investigations into regulatory changes over time enables us to analyze their impact on the appointment of professionals and company performance.

Second, we may capture the two dimensions directly; the professional-capital can be measured by various measures of human and relational capital [START_REF] Wiersema | Executive succession: the importance of social capital in CEO appointments[END_REF], and risk-taking may be proxied by the ratio of the number of years professionals have spent inside business corporations to the number of years they spent outside. We might also identify more proximate performance indicators such as M&A deals, supplemented by interviews to capture professionaldirectors' cognitive processes more directly.

3. Nikkei Business (19 March 2012 issue, pp.38-43) reports the case of Nissen Holdings which turned around its performance by appointing 4 outside directors including a lawyer. The company ensured that 'the lawyer-director would not limit his opinion to matters directly related to compliance', by giving a briefing on board meeting agenda items prior to the meeting. Third, our sample includes all listed companies, but some are newer, listed on the MOTHERS and JASDAQ sections of Tokyo Stock Exchange. TSE First Section listing was a dummy variable in our regressions, but deserves further investigation. In particular, the role of professional-directors is likely to be different for newer firms, with the board role evolving over time at different stages in the firm's lifecycle [START_REF] Lynall | Board composition from adolescence to maturity: a multitheoretic view[END_REF](see also [START_REF] Hillman | Resource dependence theory: a review[END_REF] pp.1409 for a review). It is worth studying how the 'counsel, cop, entrepreneur' roles apply to professional-directors to entrepreneurial firms prior to Initial Public Offering (IPO) and after IPO as firms mature with greater formalization and institutionalization.

Conclusion

Firms differ in their need to have professionals on their board. Notwithstanding the limitations discussed above, this study draws attention to an important factor affecting performance, namely the role of professionals as 'wise counsel' improving the overall corporate performance, and as 'cop' vs 'entrepreneur' affecting the board's risk appetite. Professional-directors bring with them their human capital, relational capital, and risk-taking disposition, and recognizing all these elements leads to a better understanding of strategy formulation and corporate governance.

  4. NikkeiBusiness (6 February 2012, pp.56-60) reports the case of Kokuyo, which has a lawyer as an executive director, contributing to proactive corporate reorganization. 5. Supreme Court judgment No.183 on 15 July 2010.

Figure

  Figure 1: Proportion (%) of professionals among directors in Japanese companies

Figure

  Figure 2: Proportion (%) of companies with professionals on boards in Japan

According to a corporate governance survey in 2002, 13.8% of outside directors were paid in stock options compared to 91.4% of inside directors (see Miyajima, H., Haramura, K., & Inagaki, K. (2003), Chart 3-20).

For example, firms in 'Textiles and Apparels' sector and those in 'Textiles and Apparels' are classified in the same sector code in the Intellectual Property Activity Survey while they are classified into two different sector codes in our sample. Therefore, we use sector mean value for 'Textile, Apparels, Pulp and Paper' sector for firms in 'Textiles and Apparels' and 'Textiles and Apparels' sectors.

We thank participants of the INCAS conferences held at Waseda University in September 2016 and at Oxford University in May 2017 for helpful comments. We gratefully acknowledge financial support for this research from the European Union Horizon 2020 Marie Sklodowska-Curie Research and Innovation Staff Exchange (RISE) grant agreement No 645763, Japanese Ministry of Education, Science, Sports, and Culture (a Grant-in-Aid for Scientific Research, 15H01958, 15K03560), JSPS Core-to-Core Program, Advanced Research Networks, Waseda University (Grant for Special Research Projects), and the Professional Service Firm Hub at Saïd Business School, University of Oxford.


The ancient Baths of Southern Syria in their Near Eastern Context

Introduction to the Balnéorient project

This article developed out of four posters exhibited at the 2009 Frontinus Symposium with two objectives. First, to briefly present a collective research program, Balnéorient, which brings together since 2007, different scholars, mainly French, to write in common the history of collective bathing in the Middle East and Egypt areas from Ancient times until today; to focus on specific topics and problems, such as identifying and analyzing continuity patterns

The second objective was to select a region under the scope of the Balnéorient program, southern Syria, for which an architectural synthesis can be attempted, for Roman/late Antique periods as well as the first centuries of Islam, based on my work and those of other researchers.

It is necessary to stress that it is a work in progress, partly built on working hypotheses that may change depending on the progress of field works carried out in the entire Middle East. However, it already allows to complement and correct existing regional studies by analyzing new archaeological data and unpublished architectural studies.

The limits of this paper are obvious. Our approach is an architectural one and relies mainly on plans and technologies. The buildings under study cannot be presented but too briefly, due to the editing standards. Besides, the historical dimension of the practice, such as the links between bath, religion and society is only touched upon here. One must be aware of one thing: due to the complexity of the phenomenon, the variety of disciplines concerned with the practice, a genuine synthesis on bath history in the Middle East is a collective task.

1. The Balneorient project (http://balneorient.hypotheses.org)

Near East and Egypt are often considered as areas offering a unique possibility to observe the evolution of collective bathing through two millennia. However, they are seldom taken into account in the ever expanding bibliography on ancient baths. This is all the more illogical, since buildings, both ancient and mediaeval, are often in an exceptional state of conservation, and written sources provide plenty of information, for each period.

The Balneorient program 1 intends to collect these extremely rich sources of data and to emphasize their value. To fulfill this purpose scholars from all Mediterranean are cooperating to write in common the history of public and collective baths. Their aim is to analyze the evolution patterns of thermal practices, to focus on transitional periods and to insist on local adaptations and differences. Within this very broad chronological framework -from Bronze Age to present day -participants from all disciplines are in the process of creating a corpus of textual, archaeological and architectural data, as well as also recording in the field new archaeological and historical facts or heritage.

Corpus

Balnéorient aims first at writing the true history of bathing, by collecting and comparing different data sets. Therefore, besides translating and editing selected written sources (a Sourcebook is under preparation), it intends to define graphic standards for presenting architectural evidence, i.e. plans redrawn at the same scale, following common graphic norms and conventions which will facilitate group discussion and reinterpretation (fig. 1a &1b).

These graphic standards elaborated collectively, help compare and contrast antique, medieval and modern architectural patterns, so far documented in a quite heterogeneous way. The short typology presented below for the small Eastern baths during Roman, Byzantine and Umayyad periods is one of the first result.

1 The Balnéorient project is a three-years project funded by (2007-2009)

Fieldwork

A second major objective is to increase and renew the data available by funding and launching field works : archaeological soundings, architectural studies, surveys, archives analyses, etc. The Balneorient website lists all major fieldwork conducted by the group alone, or in collaboration with other teams, in Yemen, Saudi Arabia, Iraqi Kurdistan, Jordan, Syria, Lebanon and Egypt.

Meetings

Thirdly scientific events are organized on a regular basis, from international symposia and conferences, to training sessions for PHD students, or workshops.

The meetings already held in Alexandria (2006) and Amman (2008), or to take place in Damascus (2009) fully demonstrate how cross exchanging information between specialists of Antiquity, Islamic world and of modern Middle Eastern societies could yield fruitful results.

The ancient Baths of Southern Syria in their Near Eastern Context

The second aim of this article is to present, through the study of several buildings in Southern Syria, a preliminary architectural synthesis on the evolution of thermal practices in the Roman province of Arabia, from its creation in 106 AD to the first century of Islam.

This fieldwork completes the results of G. Charpentier's expeditions to Northern Syria, 2 as well as those obtained by H. Broise at Bosra 3 and by S. Hoss on the baths of Palestine. 4 They help us to analyze with increasing precision and better understanding bathing practices in the Roman Eastern provinces (Syria, Palaestina, Arabia), which are still ill known despite the large number of buildings preserved and their often very good state of preservation.

The way monographs on thermal practices of Antiquity (such as Nielsen 1990 and Yegül 1992 in particular) interpreted bathing in the East were biased by this lack of documented evidence. However, recent works enable researchers to clarify several specific points and to reappraise some generally accepted conclusions.

The matter is still open for discussion and the synthesis presented below is still a rough simplification of sorts: a lot of fieldwork is being carried out on buildings still hardly documented or unpublished (at Apamea, Tyre, Jerash, Beit Mery, Tell Ash'ari, Petra, Andarin, Lattakia, Jebleh, Rasm el-Hajjal, Palmyra, al-Kalibiyya, etc.) and will very soon provide to scholars -above all those working for the collective Balnéorient project -more relevant and precise information on the history of baths in the East.

Near Eastern Baths: a typological Approach

Out of a total of more than two hundred and fifty public and private baths brought to light in the Near East (Syria, Jordan, Lebanon, Palestine/Israel), 170 have their layout sufficiently preserved to be included within a typological study. Too often roughly dated in an approximate manner, they can be nevertheless divided into three clearly chronologically distinct sub-sets: Hellenistic and Herodian private baths (35 buildings), baths of the Roman and Byzantine period (118 constructions) and baths of the Umayyad period (17 constructions).

Except for private baths, most of the Near East thermal baths of Antiquity were built between the second and sixth century AD and can be divided into two subgroups: 1. great monumental thermae erected in urban settings (with a surface area between 5,000 and 9,000 sq. m., orange squares on the map), and 2. small baths operating for some neighbourhood or village, of much more modest dimensions (between 200 and 1,500 sq. m., orange circles).

Often located in the countryside, in small settlements or in military installations, the small baths are better known than the larger urban ones, which is quite unsettling.

As a result scientific work depended on some very well-preserved baths of the Byzantine period, which lead for a long time to a distorted interpretation of thermal practices in the Orient. For instance these small "late" baths were considered as the successors of the monumental thermae of the Roman imperial period ; and were assumed to have gradually replaced the former ones. Both groups actually -the small baths and the huge thermae -are attested ever since collective bathing was initiated in the Middle East; they went through parallel transformation processes until the major breaks of the first centuries of Islam.

A late adoption

During the Hellenistic period bathing practices spread all around the Mediterranean, after developing in Greece for a few centuries. The huge number of buildings discovered in Sicily, Italy, Greece, Cyprus and -above all -in Ptolemaic Egypt5 , fully demonstrate that the Greek bath was a great success and the relative uniformity of practices during this period.

However, Levant apparently did not adopt bathing practices at this time: archaeological fieldworks, numerous in Palestine, would not have missed buildings characterized by rotundas, tholoi. Yet only a few isolated hip-bathtubs of Hellenistic date have been discovered to this day, within private housing belonging to expatriate settlers or wealthy landowners. 6 Preexisting Jewish ritual baths or individual bathrooms in these areas cannot explain this surprising absence, which is still more striking outside Palestine, in the future province of Arabia. The role played by the Jewish religion in the late adoption of the public bath, often put forward, must be pushed aside. As already suggested by S. Hoss all the entire area was reluctant, beyond the religious aspects peculiar to Judaism. Obviously Hellenization in the East concerned just a restricted elite.

This lack of popular support to thermal practices can be observed also a century or two later, at the beginning of the Roman period: baths built in Herodian palaces, following Italian architectural models, 7 could have entailed the spread of thermal practices in Orient. These baths, however, were built only as part of a protocole whose main role was to reflect the greatness of Rome: in the first and second century BC, these practices were far from being shared by the lower classes. As a consequence, the palatial baths had no direct descendants, except for some private installations in rich residences of the Nabatean kingdom. 8

Several coastal cities were adorned with baths shortly after (for instance Antioch during the reigns of Cesar and Tiberius), but Roman bathing traditions firmly took root in the East only in the second century AD, at a time when monumental urban programs were developed and another type of building, the theatre, not previously attested in these Hellenized regions, started being built.

This late introduction was nevertheless successful and long-lasting: in less than a century all cities and a large number of Syrian and Arabian lesser towns were equipped with thermal installations, from the Euphrates shores to the confines of Arabia.

Small Roman and Byzantine Baths

Small baths, often assimilated to late transitional baths whose evolution lead to the Arab hammam, are relatively ill known in the Roman period. The most ancient public buildings of that type (apart from Herodian and Nabatean private baths, limited in both time and space) are located in Capernaum (first century AD), at En Gedi (between 70 and 132 AD) in Palestine, 9 at Khirbet ed-Darih (end 1 st AD -beginning 2 nd AD) in Jordan and at Sleim in Southern Syria. 10 At Sleim, the bath may be assigned to the end of the first century AD or to the beginning of the second thanks considering construction techniques and architectural context, and is wonderfully preserved. It is laid out in an axial row scheme (apodyterium -frigidarium -tepidarium -destrictarium/laconicum -caldarium), which runs parallel to a courtyard. The political and cultural context for this bath -probably built slightly before the creation of the province of Arabia -remains unclear, but architectural models and heating techniques are obviously western imports.

Without any feature suggesting a local thermal practice, it confirms that the Hellenistic bath model was not adopted in the future province of Arabia. Baths later than those of Sleim or Khibet ed-Dahrih differ from this imported model. Plans gradually evolve the same way, from Doura Europos on the Euphrates 11 to Shâ'ra in the Lejja (Trachonitis) 12 , and apparently confirm the role of the army in the spreading of thermal practices to the new boundaries of the Roman Empire. These examples, dated to the third century AD, are laid out on a classical ring or row type plan, and look like a "miniature" adaptation of larger buildings built during the same period in neighbouring cities. Heating techniques with a hypocaust and a boiler stand by traditional patterns.

On the contrary, the cold room becomes larger and increasingly important in terms of surface, when compared to the heated sector of the baths. This evolution is obvious in two examples, Lejjun in Jordan 13 and Kalibiya in Palmyrene 14 , the former at least in a military context. This trend is already pronounced in the third century and becomes systematic in the fourth; more than the disappearance of the palestra, it is obviously the main characteristic of Near Eastern Byzantine small baths. Most often provided with one or two immersion basins, this room remains a frigidarium, but its function goes well beyond this: it is used as a resting room, a cloakroom, a meeting place, and thus becomes the most important room of bathhouses. At the same time the heated rooms tend to be smaller and less; collective piscinae are gradually replaced by individual tubs. This size decreasing of hot rooms and immersion basins has often be interpreted as an economic choice, to reduce the operating costs of buildings. However such a conclusion is hardly convincing in a rural setting often prosperous. This change in practices rather reflects a change in mentalities : people now bathe individually, even if they still do it in a same place and at the same time as others 15 .

The transformation process in heating techniques also starts rather early and develops quite gradually, from the fifth century AD onwards, with the installation of steam diffusion devices in the heated rooms 16 . This innovation, added to the reduction in size of tubs, marks the birth of the hammam, both in Oriens and in Egypt, whose main characteristic is heating through steam rather than through the hypocaust's dry heat (fig. 2). The reduction in volume of the hot rooms follows and favours this evolution towards steam baths.

At the beginning of the eighth century AD, during the Umayyad period, the baths built in the entire Near East are in all aspects similar to some examples of the sixth century, in which steam production and large cold rooms are associated. Therefore the hypothesis of a technical or architectural break linked to the Moslem conquest must be abandoned when confronted to these observations. 17

Urban Thermae

Urban monumental baths built in city centers are not attested earlier than the second century AD in the province of Arabia and probably follow/adapt models already existing on the Mediterranean coast, in Beirut or Antioch for instance. More than the adoption of thermal practices, the construction of these huge baths -as well as of theatres and other monuments previously unknown in Orientreflects how deeply concerned about promoting its image is the new political, economic and cultural power. The baths were meant to be a living image of an urban or provincial power seeking fame on an imperial scale.

The buildings still preserved are nevertheless different from imperial models fashionable in Rome, Asia Minor or North Africa. The fact that builders did not reproduce the large symmetrical plans of imperial baths and restrained themselves to more modest and non-symmetrical outlines might be the result of a cautious attitude in a recently Romanized province. In the western part of the Roman Empire, these more modest plans were abandoned for bathing buildings built on a large scale. One may also assume that extensions were planned from the start, but could not be completed within an already dense urban fabric.

In any case Eastern societies turned to bath. The adoption of baths obviously had long-lasting effects; bathhouses built in the second century BC are enlarged to a monumental scale in the third: by increasing twofold the number of hot rooms local builders follow imperial type of lay out whilst doubling their capacity (fig. 3).

The Southern baths at Bosra studied by H. Broise, 18 or the central baths in the same city, 19 illustrate this splitting process that one can also find more or less clearly in other cities of the area (Oriental baths at Jerash, 20 Hammat Gader 21 or Scythopolis, 22 etc…).

The development of these buildings, both in terms of size and number, illustrates the success of monumental baths ; it is also the result of competition and emulation between neighbouring cities. Bathhouses built at that time and until the end of the fourth century all adopt from the start an imperial symmetrical plan. The Shahba-Philippopolis baths in Southern Syria are a case in point: the town was the birthplace of Emperor Philip the Arab; this small regional centre was the focus of an impressive town building cycle during the four years of his rule (244 à 249 AD). Baths founded during this short period were laid out according to an ambitious plan of imperial type, disproportionate when considering that Shahba was nothing more than a village. After Philip's death, the baths, still in construction, underwent a radical change in the building scheme: only a small part of the initially planned building was completed, while the remainder of the project did not go beyond foundation level. The circulation patterns initially planned were also modified: the impressive façade behind the double natatio, itself surrounded by a portico, just gives access to a modest ring type bath. A specific political context explains why this evolution is so different of that in Bosra, but the unfinished initial project perfectly fits the global trend observed in the provinces of Syria and Arabia in the third century AD: the imperial type of baths was from now on ubiquitous.

The thermae of the byzantine period

Because the eastern monumental baths were hardly known, in particular in their later stages, it was suggested either that these large buildings declined from the fourth century AD onwards, 23 or that a capacity to change was restricted to small baths at the expense of monumental thermae. This view is now denied by studies carried out on Southern Syrian baths and some other ones in the area. Far from declining, buildings in this period reached their maximal extension. The huge symmetrical compositions and plans created in the third and fourth centuries increased even more in magnitude whith the addition of peripheral facilities (latrines, porticoes, pools, etc…), which made the baths even more impressively monumental.

The baths were even at times completely reconstructed and enlarged following an earthquake, as was the case in Beth Shean in the fifth century. 24 The large porticoed courtyards at Bosra, also to be found at Jerash, Beth Shean, Palmyra, or on an even more monumental scale in Tyre, are relevant examples of this trend. These marble or mosaic-paved palestrae lost all relation whatsoever to sports: their main function appears to perpetuate one of the canonical elements of the Roman model, the latter tentatively reproduced in the cities' centers, also lately modeled according to classical cities.

The vitality of urban thermal practices in the Byzantine period (from the fourth to the early sixth century AD) was paralleled by the emergence in the countryside of a new model of baths heralding the hammam. Far from being opposed, these two trends tend rather to demonstrate the increasing popularity of this institution in the Late Antique Near East, despite the sharp criticism of the "Fathers of the Church".

23 Yegül 1992 24 Mazor 1999

Bathing in Cities during Islam's first Century

The expansion of huge baths was a phenomenon lasting in cities until the sixth century, when the economic crisis affecting the entire region started to have effects on these buildings which, albeit not developing in dynamic form, nevertheless continued to function until the mid-eighth century, at the end of the Ummayad period. It seems that the thermae survived only because of an "architectural inertia" linked to their scale and size, as well as their place at the centre of cities.

Recent fieldwork carried out at Bosra (Southern Baths), at Jerash (Central Baths), 25 Apamea (Northern Baths) 26 or in Petra (Great Temple Baths), 27 and analyses of the evolution of great baths during the seventh and eighth century AD, allow one to gradually differentiate main trends. The decrease in size of pools, transformed into individual tubs, or of heated rooms (through the abandonment of certain hearths or of entire sectors), tend to bring the thermae closer to countryside models, despite a disproportionate architectural overlay inherited from previous periods.

At the beginning of the eighth century AD, the baths also remained an urban phenomenon, even if examples of buildings founded during this period are quite rare in comparison to the baths associated to "Desert Castles". At Anjar, a new city founded at the beginning of the eighth century, the bath was considered as one of the necessary facilities in a newly-built town. At Andarin, in the Syrian steppe, entirely new baths were also constructed during the Ummayad period, 28 some tens of meters away from the Proto-Byzantine building destroyed by an earthquake and reoccupied by craftsmen's installations. 29 In both cases, baths are listed among the vital facilities offered by city life. These two examples, to which should be added Qasr el-Hayr el-Sharqi also located in an urban setting, show that architectural models were perfect replicas of those characterizing baths of the countryside. The plan of these Ummayad urban foundations is identical or scarcely larger to those of hammam baths of the "Desert Castles". In both cases, the steam bath technique had been adopted.

At Anjar, the two baths were constructed in the periphery of the city, aside from the main streeet, far from the political and religious heart formed by the palacemosque group. At Jerash, the Byzantine "Central Baths", transformed during the seventh century, were destroyed at the beginning of the eighth century when the great Friday mosque was founded. 30 These two examples appear to indicate that in the Ummayad period the baths' role in the cities and in mentalities had evolved: baths kept their social importance, but their urban dimension inherited from Rome, their role as a showcase of classical culture, often put forward in order to explain the size of imperial period buildings, eventually disappeared from the cities having survived throughout the Proto-Byzantine period. It is nevertheless preserved in palace baths, but on a more private and reduced scale, in cold rooms which still reflect this care for power representation.

The economic crisis of the sixth century, followed by the Ummayad period conquests, did not initiate a break but rather gave the opportunity to bridge the gap that had formed between urban baths on the one hand, and rural and private ones on the other. The distinction between large and small-scale baths observed during all Antiquity lost all meaning at the end of the Ummayad period; all baths followed the same architectural model leading to the Mediaeval hammam. The technique of steam production gradually improved and rendered unnecessary hypocaust devices and heating walls. These were transformed into nothing but a small group of heating canals. Likewise, thanks to these technical improvements, immersion baths were progressively replaced by steam baths, a factor explaining the disappearance of tubs in favor of basins and vats.

This transformation of techniques and monuments allows one to follow the evolution of thermal practices, but raises non-architectural issues: what role did religion, both Christian and Muslim, play in these evolutions? What place did economic constraints, usually put forward to explain the reduction in size of basins and the adoption of the steam bath, have in the evolution towards the hammam? These are questions that, amongst others, the Balnéorient program attempts to answer, both collectively and by applying results from several complementary fields. The archaeological and architectural study will enable a reconstruction of practices that other approaches will probably explain.

Fig. 1 -

 1 Fig. 1 -Near-Eastern Baths selective Typology. Roman, Byzantine and Umayyad periods (Th. Fournet)

  , excavated since 2008 by the Syrian Directorate of Antiquities of Palmyra (Ing. W. As'ad), is shortly presented on the Balnéorient website. It will be presented in detail at the conference in Damascus, November 2009. 15 Thebert 2003 16 Charpentier 1995, see also an Egyptian example in Castel 2009 17 Charpentier 1995As for forms the social role of the bath does not change either. The magnificent Umayyad private or semi-private baths built in luxurious residences have long given the impression of a change in the status of bathers, of a return to a bath intended mainly for the elite ; but others examples, whose number is increasingly growing, tend to demonstrate that on the contrary, the masses keep going to the baths in town, and will do it until the medieval and modern hammams.

Fig. 2 -

 2 Fig. 2 -From Roman Baths to Hammam: Evolution of Heating Techniques(Th. Fournet, after Fournet 2008a and Charpentier 1995)

Fig. 3 -

 3 Fig. 3 -Architectural Development of the Southern Baths in Bosra from 2 nd to 6 th c. AD (Th.Fournet, after Bosra guide, 2007, p.222)

The ancient Baths of Southern Syria Th. Fournet

[START_REF] Fournet-Redon | [END_REF]

[START_REF] Hoss | [END_REF], mainly in Beth-Zur (Kh. Et-Tubeiqa), Cat. n° 24.