Long‐term Investments and Financial Structure

This paper examines how the financial structure of a firm affects the incentives of managers to act myopically. The paper shows that managers tend to choose investments that pay off too quickly if there is a possibility that shareholders will fire the managers in the future. However, this problem can be avoided if firms are appropriately financed. Since the gains from firing the managers accrue first to the creditors, the shareholders’ incentive to fire the managers is reduced when the firm increases its debt ratio. The firm should thus choose an optimal financial structure to ensure that the level of incentive for shareholders to dismiss managers is appropriately controlled.     

The Turnover of Market Leaders in Growing and Declining Industries: Evidence from Japan

This article explores the turnover of market leaders in the manufacturing and information and communications industries in Japan. We propose indices for market mobility by focusing on the turnover of market leaders and examine how the likelihood of the turnover of market leaders differs across industries. We provide evidence that market leaders are more likely to be replaced by competitors in growing and declining industries, relative to industries where the growth is more stable. Moreover, the results reveal that the turnover of market leaders is more likely to occur in research and development-intensive industries. Furthermore, the interaction effects of industry growth and concentration indicate that the turnover of market leaders is more likely to occur in declining industries with high concentration.     

Market Leadership Volatility in Japanese Industries

The paper computes the extent of marketleadership volatility by industry, and then examinesthe determinants of volatility in Japanesemanufacturing industries. Volatility varies fromindustry to industry, and changes over time in manyindustries. Concentration coexists with lessvolatility, suggesting that the former has a policysignificance. Concentration change has a significantand positive effect. Exports have avolatility-promoting effect, but imports have noeffect. Industry size tends to decrease volatility.The effect of industry growth is not found.Advertising, R&D and distribution channel have nodefinite effect respectively as well.     

The Determinants of Firm Exit in Japanese Manufacturing Industries

This paper presents new evidence on the determinants of firm exits that occurred in Japanese manufacturing industries over the period 1981--1989. Gross-number measure is used for exits. Many structural factors have exerted a definite influence on the extent of exit; across industries, capital intensity and subcontracting relationships have an exit-promoting effect, while profits, industry growth, concentration, and R&D opportunity have a negative relationship with exit. In addition, the minimum efficient size has an inverted-U-shaped relationship. However, export opportunity has only a marginal effect. These results are likely to reflect exits of small business.     

Diversification and R & D activity in Japanese manufacturing firms

This his paper examines the influence of diversification on R & D intensity in Japanese manufacturing firms. Then alternative definitions of the diversification index are used. The results show that diversification is not a factor favorable to R & D activity. The finding that advertising intensity is positively and significantly related to R & D activity should also be noted.     

How to Make the Japanese Public Pension System Reliable and Workable

This paper has two objectives. The first is to identify current problems in Japan's pension administration. The chief problem is a weak governance structure. In particular, the current governance structure ignores the role of pension participants. A rigorous division and clear assignment of responsibilities to each of the pension participants, the Social Insurance Agency, and the Ministry of Health, Labor and Welfare is urgently needed. Given rapid demographic change, the second objective is to consider the case for full tax financing of the National Basic Pension. It is estimated that the net burden would vary across different cohorts, but we demonstrate that the net burden can be smoothed across different cohorts. This result is quite different from that in the 2008 Interim Report of the Japanese National Council on Social Security.     

The efficiency of small manufacturing firms in Japan

It has been suggested that market structure will have an impact on within-industry differentials in efficiency, or cost disadvantages of small firms. To test this hypothesis, this paper examines the effects of market structure on the productivity (relative to industry productivity) of small manufacturing firms in Japan. The results show that market structure elements such as concentration and capital requirements work to the disadvantage of small-firm efficiency. The findings provide support for the hypothesis.     

Phillips Correlation and Price-Change Distributions under Declining Trend Inflation

The relationship between inflation dynamics and micro-level pricing behavior is an underexplored research area. In this article, we first document that deflationary periods in Japan were associated with (i) variations in the distribution of price changes at the micro level, and (ii) a weakening in the Phillips correlation at the macro level. We construct a multisector general equilibrium model with sector-specific menu costs, a feature that is supported by our estimation using sectoral data, and show that declining trend inflation and an increasing share of services in private consumption together can quantitatively explain the above two observations.