2003 Fiscal Year Final Research Report Summary
Empirical Examination of Corporate Governance Functions Performed by the Main Bank and the Equity Ownership Structure in Japan
| Project/Area Number |
14530132
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| Research Category |
Grant-in-Aid for Scientific Research (C)
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| Allocation Type | Single-year Grants |
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| Section | 一般 |
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| Research Field |
Commerce
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| Research Institution | International University of Japan |
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Principal Investigator |
HIRAKI Takato International University of Japan, Graduate School of International Management, Professor, 大学院・国際経営学研究科, 教授 (50208815)
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| Co-Investigator(Kenkyū-buntansha) |
ITO Akitoshi International University of Japan, Graduate School of International Management, Associate Professor, 大学院・国際経営学研究科, 助教授 (80307371)
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| Project Period (FY) |
2002 – 2003
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| Keywords | Corporate Governance / Main Bank / Cross Shareholding / Tobin's q / Monopolistic Power / Institutional Investors / Rescue Investments / Agency Costs |
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| Research Abstract |
1.We estimated Tobin's q for individual companies listed on the Tokyo Stock Exchange by using the financial and equity data from 1985 to 1998. We converted the value of stock holding and land to their market value. Especially, we checked the validity of our estimates by examining the market value of land implied by the land tax in the 1990's.
2.Using the same dataset, we empirically examined how the main bank and cross shareholding affected the firm value measured by Tobin's q. The results show that while the main bank relation lowers firm value due to its monopolistic power in the 1980's, its influence becomes neutral in the 1990's, reflecting the main bank's weakened monopolistic power. We also find that while mutual shareholding tends to lower firm value because of management entrenchment, one-way shareholding tends to increase firm value due to increased monitoring of managers.
3.We further investigated the relationship between the firm profitability and main bank. Our empirical results show that the main bank relation lowers firm profitability, indicating the existence of hold-up costs. We also find that multiple main bank relationships can reduce the negative effect of the main bank relation on the firm profitability.
4.We examined portfolio investment behavior across different types of investors (individuals, foreigners, cross shareholding, and institutional investors). We find that in the 1990's both institutional and corporate investors tend to over-invest in financially weak firms. We interpret this as indicating that they may invest in order to rescue weak keiretsu member firms.
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