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.     

Asymmetric‐information allocation to avoid coordination failure

In the context of team production, this paper studies the optimal (deterministic and stochastic) information allocation that implements desired effort levels as the unique Bayesian equilibrium. We show that under certain conditions, it is optimal to asymmetrically inform agents even though they may be ex ante symmetric. The main intuition is that informing the agents asymmetrically can be effective in avoiding “bad” equilibria, that is, equilibria with coordination failure.     

Time Spent on Beneficial Leisure Activities Among Elder Caregivers in Their Third Age

The Third Age is an emerging postretirement life stage characterized by better health and greater independence than previous cohorts have experienced, and recognized as an ideal time for personal growth and leisure. Yet the same demographic force that is partially responsible for this new life stage—population aging—is also driving an increased need for long-term services and supports, and Third Agers often find themselves fulfilling these caregiving roles. Thus, data from the 2013 American Time Use survey were analyzed to assess elder-caregiving-related barriers to leisure among Third Agers. While, caregivers were found to report more total leisure time and social activities, they reported less time on physical activities than noncaregivers. Results were found to differ by weekday or weekend status. Future research needs to consider specific types of leisure time use, as well as timing of leisure activities, to promote quality of life among caregivers in their Third Age.     

Innovation responses of Japanese firms to Chinese import competition

This paper examines innovation responses of a panel of Japanese firms to the intensified import competition from China in the period 1995–2005. We build a comprehensive firm-level dataset linking patents and R&D merged to cross-industry measures of Chinese import competition. Accounting for a simultaneity bias between innovation and importing and the possible heterogeneous effects across firms, we found that patenting has increased in response to an influx of Chinese imports, but it has adversely affected the quality of innovation, measured by forward citations received. These effects are only observed for globally engaged firms, not for firms focusing on the domestic market.     

Expansion abroad and jobs at home: Evidence from Japanese multinational enterprises

This paper examines the so-called ‘exporting job’ hypothesis – that expansion of overseas operations of manufacturing multinational enterprises (MNEs) reduces home employment – using a newly constructed matched parent-affiliate panel dataset of Japanese MNEs over the period 1991–2002. The results do not support the widely held view that overseas operations of MNEs lower home employment. On the contrary, there is some evidence that expansion of overseas operations may have helped to maintain the level of home employment.     

Production sharing and trade flows: A comparative analysis of Japan and the US

This paper examines the determinants of trade flows in parts and components related to global production sharing in machinery industries, using a newly compiled panel dataset for Japan and the US over the period 1988–2005. The findings show the importance of labour costs, and the quality of the legal system and physical infrastructure in attracting production sharing, as suggested by theory. It is also found that US production networks in the electronics industry have a regional focus on Asia, while those in the automobile industry are concentrated in North America. On the other hand, Japanese production networks in both industries are concentrated in Asia.     

House price appreciation, liquidity constraints, and second mortgages

This paper analyzes how households use second mortgages in response to shocks to housing wealth. Two related questions are examined: Do households use home equity in response to house price appreciation? Are liquidity constraints important for homeowners? A theoretical model shows that liquidity-constrained households respond more strongly to house price changes than unconstrained households. Using PSID, I find noteworthy differences in borrowing patterns of homeowners by the ratio of wealth to income. Low wealth-to-income homeowners exhibit a strong reaction to house price appreciation, whereas high wealth-to-income ones do not. The results indicate the importance of liquidity constraints among homeowners.