Examine the functions and efficiency of systems in light of participant behavior incentives

Comparison of shareholder derivative suit systems in Japan, US, and China

Legal research includes the interdisciplinary field of “law and economics”, a field that originated in the US. Traditional legal research places more emphasis on the study of comparative law and leading cases, interrogating the integrity and stability of system operations, but in contrast, law and economics analyzes legal systems using perspectives and methods from economics.

Being a specialist in corporate and commercial law, I bring perspectives from both the traditional legal research and law and economics to my focus on the functions and efficiency of legal systems and on the incentives of interested parties.

In the former, if there are choices in the design of legal system to accomplish a certain goal, we examine which system is the most adequate and cost-efficient for that purpose.

In the latter, we analyze factors including motivations for participants within a system and their efforts towards compliance with laws and regulations. Even if, for example, government lays down strong enforcement and penalties, a system whose design ignores behavior incentives for participants cannot achieve its objectives efficiently and with the smallest social cost.

This is the viewpoint from which I am researching shareholder derivative suits as set out in corporate law. Japan's system of shareholder derivative suits used the US system as a model. And in China, amendments to corporate law in 2006 comprised a shareholder derivative suit system. We will compare the functions and efficiency of the differently designed systems in Japan, the US, and China while examining what a more rational system should look like.

Encourage active implementation or focus on preventing abuse?

In Japan and the US, you can file a suit if you own one share. While these designs are more liberal and enable shareholders to exercise their rights, there are also misgivings that these systems may be abused or misused, therefore, it is important to equip them to end deleterious suits, including by dismissal or settlement. In contrast, under the system in China, shareholders cannot file a suit unless they own a certain percentage of the issued shares, making it a tighter design that seeks to prevent abuse. Despite the system being established in 2006, it has, therefore, almost never been put to use. Shareholder derivative suit systems provide for shareholders' rights to hold management accountable for their responsibilities to companies, and need to be designed in a way that enables them to be meritorious suits.

My research interest lies in the particular question of the behavior incentives for participants in these systems, for whom they are designed. The reason for my interest is that I believe it is important to consider the motivations of participants if we are to achieve the objectives of such systems with the smallest social cost.


Department of Law and Politics, Graduate School of Law and Politics
GU Dandan 

Came to Japan as a Japanese Government (Monbukagakusho: MEXT) Scholarship student in 2008.
PhD from Graduate School of Social Sciences, Tokyo Metropolitan University in 2013.