1994 Fiscal Year Final Research Report Summary
A Comparative Study of Japanese and the U.S.Security Markets
| Project/Area Number |
05451114
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| Research Category |
Grant-in-Aid for General Scientific Research (B)
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| Allocation Type | Single-year Grants |
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| Research Field |
Public finance/Monetary economics
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| Research Institution | Yokohama National University |
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Principal Investigator |
KURASAWA Motonari Yokohama National University, Faculty of Economics, Professor, 経済学部, 教授 (40018057)
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| Co-Investigator(Kenkyū-buntansha) |
MORITA Hiroshi Faculty of Business Administration, 経営学部, 助教授 (70239664)
MURASE Hideaki Yokohama National University, Faculty of Economics, Associate Professor, 経済学部, 助教授 (40239520)
AKIYAMA Taro Yokohama National University, Faculty of Economics, Associate Professor, 経済学部, 助教授 (40167854)
YANO Makoto Yokohama National University, Faculty of Economics, Professor, 経済学部, 教授 (30191175)
ASAKO Kazumi Hitotsubashi University, Institute of Economic Research, Professor, 経済研究所, 教授 (60134194)
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| Project Period (FY) |
1993 – 1994
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| Keywords | Security Markets / Primary Markets / Corporate Finance / Mutual Stock Holding / Corporate Governance |
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| Research Abstract |
In this project, we have made a comparative study on the securities markets of Japan and the U.S.Our study looks at the function of securities markets from two viewpoints.
(1) We have built a model of corporate finance that explicitly incorporates the indivisibility of security issuance. In that model, we analyzed the role of a primary securities market in capital formation. The main finding is that, if despite the indivisibility of security issuance, a primary security market can be organized in such a way that competition can contribute to the efficiency of allocation, thereby enhancing capital formation. This result is applied in order to demonstrate that the Japanese style corporate finance, which relies heavily on the exclusive and fixed relationship between firms and their "main banks, " may slow capital formation in comparison with the U.S.-European style, which relies more on open markets for primary securities.
(2) We have also built a model that highlights the incentives of managers and analyzed the role of mutual holding of securities, another important feature of the Japanese securities market, from the viewpoint of informational economics. The analysis demonstrates that mutual holdings of securities contribute to the efficiency of allocation. In particular, under the assumption that security prices are set rationally, it tends to increase the efficiency of management. If, instead, securities are over-valued due to the misperception of investors, mutual holdings may mitigate the problem of over investment by blocking the pressure from hostile takeovers.
(3) It is important to investigate empirically the conditions under which these two, somewhat opposing, conclusions may apply. So far, only partial evidence has been established supporting the second conclusion in the Japanese securities market, and further empirical studies are left for future investigations.
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