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What drives the profitability of Japanese multi-business corporations? A variance components analysis

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  • Fukui, Yoshitaka
  • Ushijima, Tatsuo

Abstract

This article decomposes the business-level profit rate of Japanese multi-business corporations by performing a variance components analysis on a large sample of publicly traded non-financial firms in 1998-2003. Consistent with US evidence, estimation results demonstrate that profitability is predominantly determined by business-level factors, not corporate-level ones, suggesting that a typical multi-business corporation in Japan is a combination of relatively distinct businesses in terms of profit.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of the Japanese and International Economies.

Volume (Year): 25 (2011)
Issue (Month): 2 (June)
Pages: 1-11

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Handle: RePEc:eee:jjieco:v:25:y:2011:i:2:p:1-11

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Web page: http://www.elsevier.com/locate/inca/622903

Related research

Keywords: Profitability Variance component analysis Diversification Japan;

References

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  1. Villalonga, Belen, 2004. "Intangible resources, Tobin's q, and sustainability of performance differences," Journal of Economic Behavior & Organization, Elsevier, vol. 54(2), pages 205-230, June.
  2. Anita M. McGahan & Michael E. Porter, 2002. "What Do We Know About Variance in Accounting Profitability?," Management Science, INFORMS, vol. 48(7), pages 834-851, July.
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  6. Fukui, Yoshitaka & Ushijima, Tatsuo, 2007. "Corporate diversification, performance, and restructuring in the largest Japanese manufacturers," Journal of the Japanese and International Economies, Elsevier, vol. 21(3), pages 303-323, September.
  7. Belén Villalonga, 2004. "Diversification Discount or Premium? New Evidence from the Business Information Tracking Series," Journal of Finance, American Finance Association, vol. 59(2), pages 479-506, 04.
  8. Karl Lins & Henri Servaes, 1999. "International Evidence on the Value of Corporate Diversification," Journal of Finance, American Finance Association, vol. 54(6), pages 2215-2239, December.
  9. Panzar, John C & Willig, Robert D, 1981. "Economies of Scope," American Economic Review, American Economic Association, vol. 71(2), pages 268-72, May.
  10. Schmalensee, Richard., 1984. "Do markets differ much?," Working papers 1531-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
  11. Jeremy C. Stein, 1995. "Internal Capital Markets and the Competition for Corporate Resources," NBER Working Papers 5101, National Bureau of Economic Research, Inc.
  12. Hideshi Itoh, 2003. "Corporate Restructuring in Japan Part I: Can M-Form Organization Manage Diverse Businesses?," The Japanese Economic Review, Japanese Economic Association, vol. 54(1), pages 49-73.
  13. Anita M. McGahan & Michael E. Porter, 1999. "The Persistence of Shocks to Profitability," The Review of Economics and Statistics, MIT Press, vol. 81(1), pages 143-153, February.
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