DEBT FORGIVENESS AND STOCK PRICE REACTION OF LENDING BANKS: THEORY AND EVIDENCE FROM JAPAN

We provide a simple model for analyzing how debt forgiveness affects the stock price of a lending bank. Our model shows that although debt forgiveness increases shareholder wealth of a bank in healthy financial condition, it decreases shareholder wealth of a bank in unhealthy financial condition. We empirically investigate the announcement effect of debt forgiveness on bank stock prices in Japanese markets. On average, lending banks experience a significant negative announcement effect with respect to debt forgiveness. Consistent with the prediction of the model, we find a negative relation between the announcement effect and the net bad loan ratio as a proxy of the unhealthiness of the financial condition of the bank.     

Collective Myopia and Disciplinary Power Behind the Scenes of Unethical Practices: A Diagnostic Theory on Japanese Organization

This study draws on multiple writings to offer a new conceptualization, one that aids in the assessment of unethical practices. Traditionally, phenomenology and the sociology of knowledge have focused on perception, cognition and common sense. Ethnomethodology has focused on procedural infrastructures of ordinary lives. This article combines concepts and ideas from these methodologies in the general concept of ‘collective myopia’ with some Habermasian and Foucaultian influences. The conceptualization focuses on normative controls operating behind the scenes of unethical practices in Japanese business. The contributions of national culture to the crimes are omitted as much as possible to establish a position of general theory. The conceptualization is then applied to examine the case of the Dai‐ichi Kangyo Bank, which was linked to racketeering in 1997.     

Collective Myopia and Defective Higher Educations Behind the Scenes of Ethically Bankrupted Economic Systems: A Reflexive Note from a Japanese University and Taking a Step Toward Transcultural Dialogues

This study focused on the indirect influences of defective higher education, especially management education, on the corruption of Japanese business communities since 1997. Most arrested or penalized Japanese executives and bureaucrats since 1997 were the alumni of prestigious Japanese universities. Their levels of academic achievements are, consequently, conceived to be the highest of Japanese standards. They were, however, found guilty. Why did these highly intelligent Japanese adults make such fatal mistakes? In this article, the author argued that the event of the continuous exposure of scandals and corruptions in Japan since 1997 was an unintended consequence of Japan's educational systems through Habermasian and Foucaultian positions.     

The Perceptual Gaps Between Companies’ and University Students’ Views on Fundamental Competencies

This study examines the gap between the competencies that companies expect of university students and those that university students believe companies are seeking. We find that a gap exists between companies’ and students’ evaluations of the competencies required in the workplace. Surprisingly, companies’ and students’ priorities related to competencies are different. Our results show that both companies and students highly value versatile personal competencies as essential skills for employees. Teamwork skills are not a top priority for companies although students value them highest of the various attributes. Gaps also exist between the two groups regarding their evaluation of personality traits. These findings contribute to the development of appropriate curricula for universities and career education.     

Foreign Direct Investment and Labor Quality in Developing Countries

The quality of local labor is an important factor in a multinational corporation's (MNC) decision to set up production operations in a developing country. It is often observed that developing country governments attempt to attract MNCs by enhancing labor quality. This paper studies the interaction between an MNC and a local government which has superior information on local labor quality. The local government has an incentive to enhance the labor quality and share that information with the MNC because it increases both its net tax revenue and profit of the MNC. The paper provides an explanation for recent findings of FDI in developing countries: the bulk of FDI has been directed toward a limited number of countries and human capital plays an increasingly important role in attracting FDI.     

Managerial Ownership and Earnings Management: Theory and Empirical Evidence from Japan

This paper examines the relationship between managerial ownership and opportunistic managerial behavior relating to earnings management. Economics theory identifies two apparently conflicting effects of managerial ownership on managers' incentives: the incentive alignment effect and the management entrenchment effect. We construct a theoretical model demonstrating the two effects. This model suggests that as managerial ownership increases, earnings management decreases for both high and low levels of managerial ownership, while it increases for intermediate levels of managerial ownership if the sensitivity of the probability of managerial dismissal to the corporate performance is high enough and/or the manager's private benefit derived from managerial position is high enough. In a sample of Japanese firms, we find a significant nonmonotonic relationship between managerial ownership and discretionary accruals, consistent with our model.     

A THEORY OF UNWINDING OF CROSS‐SHAREHOLDING UNDER MANAGERIAL ENTRENCHMENT

In this article I examine corporate strategies regarding cross‐shareholding and the unwinding of cross‐shareholding, and I present a rationale for corporate managers to unwind cross‐shareholding from the perspective of managerial entrenchment. Although cross‐shareholding enhances managerial entrenchment, the increased agency costs associated with managerial opportunism increase the incentives for a hostile takeover. To avoid a takeover, managers have to unwind cross‐shareholdings. The unwinding of cross‐shareholdings implies that managers will relinquish their entrenchment and thus will act to increase shareholders' wealth in the future. The model proposed here explains why cross‐shareholdings among Japanese firms declined during the 1990s, a decade during which the cost of takeovers decreased because of financial market deregulation.     

Productivity and Entrepreneurial Chraracteristics in New Japanese Firms

In this paper, we estimate the production function of new Japanese firms and examine whether the total factor productivity is affected by the human capital and gender of entrepreneurs. Empirical results show decreasing returns to scale of production, which verifies the assumption of production functions in many previous studies on entrepreneurship. Further, it is shown that the entrepreneur's age has a significantly negative effect on productivity, and the negative effect increases after 60 years of age. Although related business experience before startup has a significantly positive effect, the magnitude is limited and cannot overcome the negative effect of age. The results indicate the importance of starting up while young, at the latest, before 60 years of age.