Corporate diversification,performance, and restructuring in the largest Japanese manufacturers

This article examines the industry diversification of the 142 largest Japanese manufacturers in 1973–1998. We find that sample firms steadily increased diversification. Despite the increase, the relatedness of their business measured in three ways based on the Japanese IO table stayed essentially constant. Regression results show that the average relationship between diversification and firm performance is negative. Firms can mitigate the negative impact of diversification on profitability by confining diversification to industries that are closely related to their main business. However, this effect of relatedness is insignificant for firm value (Tobin's Q), suggesting that the profitability increase due to greater relatedness does not last long. Consistently, a wide range of diversified firms restructured themselves in the late 1990s by divesting business units. J. Japanese Int. Economies 21 (3) (2007) 303–323.     

R&D and market value of Japanese firms in the 1990s

There is a concern in Japan that the R&D profitability of its domestic firms fell significantly in the 1990s, following the US pattern in the 1980s. This paper finds, however, that the effect of R&D on the market value of a firm, relative to that of tangible assets, increased in the 1990s in terms of both within firm variations and cross section variations, even though the average market value itself significantly fell. More trade and higher foreign ownership significantly enhanced the market value of a firm, and so did more patents in sectors such as pharmaceuticals. J. Japanese Int. Economies 20 (2) (2006) 155–176.     

Pricing contingent convertibles with idiosyncratic risk

We consider capital structure including equity, straight bonds (SBs), and contingent convertibles (CoCos) for nonfinancial firms. We price equity and CoCos by a utility-based method. We show that benefits from issuing CoCos increase dramatically with idiosyncratic risk and risk aversion. The firm value is concave in CoCos' conversion ratio and the optimal conversion ratio increases with risk aversion and idiosyncratic risk. If risk aversion is sufficiently high, shareholders' risk-shifting incentives disappear, and the firm issues less CoCos and equity and more SBs as idiosyncratic risk rises. The higher the idiosyncratic risk or risk aversion, the higher the leverage.     

On Regional Monetary Arrangements for ASEAN

This paper analyzes the extent to which ASEAN may be suitable for a regional monetary arrangement. On the economic front, we review evidence on patterns of trade, economic shocks, the extent of factor mobility, and the monetary transmission mechanism. We find that ASEAN today is less suitable for a regional monetary arrangement than the Euro area was before the Maastricht Treaty, but the differences are not large. On the political front, we analyze the prerequisites for monetary integration in light of 50 years of European experience. We conclude that a firm political commitment would be key to ensuring that an attempt to form a regional monetary arrangement is not viewed as simply another fixed exchange rate system open to speculative attack. That commitment would have to be strong enough to survive for an extended period and to support difficult decisions such as rendering the central bank independent, adhering to fiscal and exchange rate arrangements even if the policy stance conflicts with that which would be adopted on the basis of purely domestic considerations, and accepting supranational directives. These are very considerable prerequisites for success. J. Japan. Int. Econ., June 2000, 14(2), pp. 121–148. International Monetary Fund; University of California, Berkeley; and International Monetary Fund. Copyright 2000 Academic Press.Journal of Economic Literature Classification Numbers: F33, F36, F41, F42.     

The takeover and selection effects of foreign-owned establishments: an analysis using linked employer–employee data

We provide the first estimates of the effect of foreign ownership on wages in Germany, controlling for the observed and unobserved characteristics of workers and plants. We also test whether the wage gains from joining a foreign-owned firm are subsequently lost when leaving that firm, and we examine whether wage gains vary across the sample. We find large selection effects in terms of worker and plant components of wages. Once the selection effect is taken into account, the takeover effect is small and in some cases insignificantly different from zero.

Firm-level analysis of information network use and productivity in Japan

This paper presents firm-level micro analysis of information network use and the impact of such use on a firm's productivity. The positive impact of information network use on productivity growth is confirmed using METI's firm-level data for Japanese manufacturers and distributors from 1991 to 2000. In addition, the relationship between information networks and business networks is investigated, and it is found that these two types of networks are complementary in promoting productivity growth of a firm. J. Japanese Int. Economies 21 (1) (2007) 121–137.     

International mixed duopoly and strategic commitments

This paper examines an international mixed model in which a social-welfare-maximizing domestic public firm competes against a profit-maximizing foreign private firm. First, the public firm can adopt either a lifetime employment contract or a wage-rise contract as strategic commitments. Second, the foreign private firm decides whether or not to enter the market. Third, if the foreign private firm enters, each firm independently chooses its actual output, while if the foreign private firm does not enter, the public firm acts as a monopolist. The paper shows the equilibrium of the international mixed model.

Government Funding Policy Towards Communicable Diseases

The paper investigates the choice of government to offer a grant to a potential entrant aimed at reducing its fixed cost of entry when a monopoly firm provides the needed pharmaceutical drug given the prevalence path of the disease in a dynamic economic framework. The results of present study suggest that government can use a grant to credibly threaten the entry of a new firm into the industry and to promote limit-output pricing by the incumbent firm. The paper therefore suggests that the government policy set includes subsidizing the potential entry of a new firm into an industry manufacturing pharmaceutical drugs for the treatment of a communicable disease. Clearly, foreign aid could also be used as a source of this credible threat. The study also extends the paper by Mechoulan (2007) through the introduction of the government’s choice into the model.

Has there been any structural convergence in the transmission of European monetary policies?

This paper makes three contributions. First we present a technique by which the monetary transmission mechanism of Germany, France, the UK and the Eurozone can be decomposed into its component cycles, compared across economies and across time. As a result, we found that the individual data generating processes have varied over time. Second we show that Germany has now converged on the rest of Europe and not vice versa, although Germany had dominated monetary policy making in Europe for many years. Third, we show that the UK as an outsider has behaved like a peripheral EMU country, even when EMU was not in place. In other words, the transmission mechanisms of Germany and the UK were fundamentally different. Hence, when that German monetary policy dominated Europe in a way that was not in line with the rest of Europe, never mind the UK, it is no surprise that the UK eventually left the ERM (1992). The current financial crisis may enforce the trend of convergence of the transmission mechanism. But there have been signs of a divergence between core and periphery, to some extent involving the UK, so this general convergence, as opposed to tighter convergence in the core, may not last.

International Trade and Bank Groups: Welfare Enhancing or Welfare Reducing?

In international competition, are bank groups efficiency enhancing or efficiency reducing? This paper attempts to clarify this issue by asking instead: efficiency for whom? In a simple, illustrative model, this paper shows that bank groups can be efficiency enhancing for the bank and the member firms, but hurting its competitor. More important global welfare rises with bank groups. These results are robust when we allow the bank and the member firm to bargain over its loan rate, when bank groups can be formed endogenously and when there are multiple exporters. Results in this paper suggest alternative interpretations of existing econometric results concerning the role of Japanese groups in U.S.–Japan trade. J. Japan. Int. Econ., June 2002, 16(2) pp. 212–226. Department of Economics, University of California, Santa Cruz, Santa Cruz, California.     

内部控制有助于提升公司价值吗?

近年来的研究发现,公司所处的良好外部制度环境有助于提升公司的价值。论文聚焦公司内部制度环境,使用厦门大学内控指数课题组构建的2007-2009年我国上市公司内部控制指数,研究了内部控制对公司价值的影响。研究发现:(1)内部控制的改善有助于提升公司的价值,并且内部控制的改善能够减轻政府控制对公司价值造成的负面影响(相对于非政府控制的公司);(2)内部控制的变化对公司价值变化的影响逐渐减弱,尽管政府控制能缓和这种递减的趋势;(3)当公司所面临的外部制度环境较好时,内部控制的改善对公司价值的提升作用更加明显。研究建议监管机构应进一步推进我国上市公司的内部控制建设。     

Missing Household Saving and Valuation of Corporations: Inquiry into Japanese National Accounts I

The Japanese household sector has suffered a capital loss of some 400 trillion yen (in 1990 consumption prices) since 1970. This is a large enough loss to explain the Japanese recession of the 1990s. We can trace some three fourths of this capital loss to the loss in the market value of Japanese corporations relative to their accounting value (at reproduction cost). The behavior of the corporate sector leading to this loss is obscured because, in the Japanese National Accounts, the corporate sector contains both private and public enterprises, and information presented for this sector is seriously incomplete. Nevertheless, data suggest that corporations have attempted to maximize their productive capacity rather than their market value and overinvested in plant and equipment since at least 1970. An unusual corporate governance structure in Japan may have permitted and even induced corporate management to follow such a strategy. The paper concludes with a set of recommendations to improve the presentation of these issues in the National Accounts. J. Japan. Int. Econ., June 2002, 16(2) pp. 147–176. University of Pennsylvania, Philadelphia, Pennsylvania 19104 and NBER. © 2002 Elsevier Science (USA).Journal of Economic Literature Classification Numbers: C82, E21, E22, G30.     

Do Campaign Contributions and Lobbying Expenditures by Firms Create “Political” Capital?

We examine the relation between a firm’s campaign contributions and lobbying expenditures and its Tobin’s q. We follow other studies that use q to measure the value of the firm’s intangible capital (e.g., the value of advertising, R&D, or environmental performance). Researchers have found a positive and significant relation between intangible assets and q. If political capital exists, it is an intangible asset. However, we find little relation between q and political contributions, suggesting that campaign contributions may not have long term effects on political markets. This is consistent with the view that contributions are done by firms as a response to a short term opportunity not as a way of building long-term political capital.

Horizontal transfer,vertical promotion,and evolution of firm organization

This paper investigates interactions among horizontal transfers, promotions across ranks, and creation and destruction of jobs inside a large Japanese manufacturing firm. In this sample firm, we find that job creation and destruction accounts for the majority of horizontal transfers of employees within the firm. This is in sharp contrast to a popular perception that employees move according to a well-defined career path in a stable organization with an internal labor market. Instead, we find that units and jobs are constantly created and destroyed at this firm and that individual career paths are far more dynamic and state and path dependent than the popular perception would suggest.The econometric analysis on determinants of promotion policy confirm these findings, as well as predictions based on the multi-skilling model of human capital. First of all, transfers to functionally similar units which enable employees to acquire multiple skills do enhance promotion probability. On the other hand, transfers to functionally or geographically different units are often detrimental to the promotion prospect, especially those that occur at earlier stages of an employee's career. In general, an employee's career at this firm is significantly influenced by the success or failure of particular units and, in particular, we find that the promotion probability for some types of employees is significantly higher for those transferred from sections that had been eliminated, and also for those transferred into newly created sections. J. Japanese Int. Economies 20 (1) (2006) 20–49.     

Optimal Pegs for East Asian Currencies

It has been evidenced that the U.S. dollar is prominent in the exchange rate regimes of Asian countries. This paper shows that the relative stability of Asian exchange rates against the U.S. dollar until the 1997 crisis is not accounted for by the theory of optimum currency areas, in contradiction to the situation in Europe vis-à-vis the deutsche mark. An alternative framework is proposed where the absence of a yen bloc is explained by the mismatch between the country distribution of trade and the currency distribution of the debt. It is shown that the lack of cooperation makes Asian countries underweight the yen in their implicit basket pegs.J. Japan. Int. Econ., March 1999,13(1), pp. 44–60. University of Lille 2 (CADRE) and CEPII, 9 rue G. Pitard, 75015 Paris, France.Copyright 1999 Academic Press.Journal of Economic LiteratureClassification Numbers: F31, F33, F36.     

Monetary Policy, Credit, and Real Activity: Evidence from the Balance Sheet of Japanese Firms

We analyze the mechanism of monetary transmission in the Japanese economy by using the quarterly time series data disaggregated by firm size. In particular we examine the channels through which monetary policy influences the firm's fixed investment with special focus on the firm's land. We estimate the vector autoregressive model where we encompass two competing hypotheses on the monetary transmission: monetary and credit channels. Our evidence is in support of the credit channel. We find that land has played a vital role in the monetary transmission, especially for small firms. Moreover, we find that fall of land value in 1990s weakened the efficacy of monetary policy considerably. J. Japan. Int. Econ., December 2000, 14(4), pp. 385–407. Institute of Social and Economic Research, Osaka University, Osaka, Japan Copyright 2000 Academic Press.Journal of Economic Literature Classification Numbers: E22, E32, E44, E51.     

商业模式与企业绩效:控制机制的调节作用

基于组织匹配的观点,文章指出商业模式和控制机制之间存在匹配关系,因为商业模式由企业成员运营,其能否有效运作取决于这些成员的行为。因此,企业需要设计恰当的控制机制来保证商业模式有效运作。文章通过分析控制机制对商业模式与企业绩效关系的影响来发现商业模式和控制机制的匹配关系。研究发现：结果控制正向调节新颖型商业模式与企业绩效的关系,负向调节效率型商业模式与企业绩效的关系;过程控制负向调节新颖型商业模式与企业绩效的关系,正向调节效率型商业模式与企业绩效的关系。文章从控制机制视角回答了如何保证商业模式有效运作的问题,对理解商业模式价值有促进作用,并丰富了对控制机制设计的认识。同时,文章可以指导企业针对其商业模式设计控制机制,通过实现两者的匹配来保证商业模式有效运作进而提高企业绩效。     

Shareholder Empowerment and Board of Directors Effectiveness*

We develop a model to examine implications of empowering shareholders to replace directors. We find that shareholder empowerment functions as a double-edged sword. On the one hand, it can weaken ineffective boards' incentive to hold on to their position. On the other hand, it can induce both effective and ineffective boards to behave strategically to avoid a potential dismissal. As a result, empowerment does not necessarily increase firm value; in some cases, empowerment exacerbates the agency problem it is intended to address. Giving shareholders the power to set board compensation (have a “say on pay”) can mitigate these problems. However, even when empowerment benefits (harms) the shareholders, firm value may decrease (increase). Finally, we discuss empirical and policy implications of the main findings.     

Flexibility versus Commitment in Personnel Management

This paper compares human resources (HR) policies embedded in the Japanese and U.S. management systems. We adapt a model from the literature on irreversible investment and use it to examine the trade-off between flexibility to adjust the labor force and higher productivity stemming from the greater commitment of the firm to its employees. In the model, two types of contracts with otherwise identical workers can coexist. One possibility is for firms to commit to a permanent employment contract that precludes dismissal at will. The alternative is a temporary employment contract that allows flexibility to adjust the firm's labor force during demand downturns, but involves higher labor cost per unit of output. Using an example, we illustrate the possible magnitude of the value of flexibility and suggest that adopting long-term contracts in the wrong environment can significantly reduce firm value. The model yields predictions for the optimal labor force composition and its relation to the characteristics of the firm's market. We also consider practices that develop to complement permanent employment. The predictions are then examined in light of evidence on the HR practices in Japan and the United States in the past 50 years and are found to be consistent with the stylized facts in the literature. J. Japan. Int. Econ., December 2001, 15(4), pp. 515–556. Hebrew University, Jerusalem, Israel, and University of Illinois at Urbana-Champaign, Urbana, Illinois. © 2001 Elsevier Science (USA).Journal of Economic Literature Classification Numbers: J31, J33, J41, J64.     

Is R&D cash flow sensitive? Evidence from Chinese industrial firms

We hypothesize that research and development (R&D) is sensitive to cash flow fluctuations due to asymmetric information and agency problems in the credit market. We adopt a variant of the Q model for R&D investment using the value of the firm, physical capital and employment to capture firm fundamentals as proxies for investment opportunities. We add cash flow to this specification, and estimate the augmented model separately for R&D participation and spending decisions using data on Chinese industrial firms for the period 2001–2006. We find that R&D participation and spending are sensitive to cash flow fluctuations, conditional on firm fundamentals. We also find that the cash flow sensitivity of R&D varies across firms depending on ownership.