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Livedoor Case Study

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Livedoor
Internet services company Livedoor have benefited from loopholes in the laws of equity trading to inflate the amount of assets held by the company and its president, Horie, Livedoor who led the group. Livedoor was created in April 1996 and Horie made his debut on the stock market in April 2000. Its market capitalization increased to 830 billion yenin December 2005, 15 times the peak. Behind the steep jump in the value of the company was a series of tactical moves. Livedoor strategy focused on how to attract money in speculative investments of individual investors, largely ignoring the institutional actors. Livedoor operations proved to be a kind of “play” on the pretext of efforts to challenge the establishment. Livedoor deviates from the path of the just business. On January 23 2006, Horie and other three executives were arrested. Then Tokyo Stock Exchange delisted Livedoor new management team face the task of restoring normal operations and reviving company.
Livedoor’s board structure was not independent enough to monitor managers for the sake of shareholders, and Livedoor executives looked at a specific director rather than serving shareholders’ interests. It appears that Livedoor took a convenient part of Anglo-American corporate governance without understanding the nature of the theory. Livedoor made a large part of its income through unsustainable business: some from newly acquired subsidiaries and others from non-core finance business. This revenue was expected to be highly volatile. Hence, Livedoor needed to put varnish on its financial statement to keep its appearance attractive. Livedoor should have fostered a core business that could have made sound profits in the long run instead of going for short-term gains.
The unprecedented scale of M&A activities was made possible by the strong finance team led by CFO Miyauchi. The finance

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