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The cost of capital in Japan: Recent evidence and further results


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  • Ando, Albert
  • Auerbach, Alan J.


We extend our recent work measuring the cost of capital in Japan and the United States by considering several questions that such results raised. Among our findings are: (1) The small firm - large firm distinction appears to be more significant in Japan, not in the United States; (2) Correcting Japanese accounting statements for cross-holding raises the estimated Japanese cost-of-capital by about 1 percentage point; (3) Correcting Japanese accounting statements for unmeasured returns to land has a significantly more important effect: the most conservative correction we attempt raises the implied Japanese return to capital to parity with the United States during the mid-1980's.

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

Volume (Year): 4 (1990)
Issue (Month): 4 (December)
Pages: 323-350

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Handle: RePEc:eee:jjieco:v:4:y:1990:i:4:p:323-350

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Cited by:
  1. Albert Ando & John Hancock & Gary Sawchuk, 1997. "Cost of Capital for the United States, Japan, and Canada: An Attempt at Measurement Based on Individual Company Records and Aggregate National Acccoun," NBER Working Papers 5884, National Bureau of Economic Research, Inc.
  2. Nobuhiro Kiyotaki & Kenneth D. West, 1996. "Business Fixed Investment and the Recent Business Cycle in Japan," NBER Working Papers 5546, National Bureau of Economic Research, Inc.
  3. Anthony J. Richards, 1991. "The Cost of Equity Capital in Australia: What Can We Learn from International Equity Returns?," RBA Research Discussion Papers, Reserve Bank of Australia rdp9107, Reserve Bank of Australia.
  4. Shibakawa, Rinya, 1994. "Corporate Governance, Cost of Capital and Financial Distress," Hitotsubashi Journal of commerce and management, Hitotsubashi University, Hitotsubashi University, vol. 29(1), pages 1-14, December.
  5. Katzner, Donald W., 2001. "Explaining the Japanese economic miracle," Japan and the World Economy, Elsevier, Elsevier, vol. 13(3), pages 303-319, August.
  6. Douglas Stone & William T. Ziemba, 1993. "Land and Stock Prices in Japan," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 7(3), pages 149-165, Summer.
  7. Bronwyn H. Hall, 1991. "Corporate Restructuring and Investment Horizons," NBER Working Papers 3794, National Bureau of Economic Research, Inc.
  8. George Furstenberg, 1998. "From Worldwide Capital Mobility to International Financial Integration: A Review Essay," Open Economies Review, Springer, Springer, vol. 9(1), pages 53-84, January.
  9. Greaney, Theresa M., 1995. "When giants converge: The role of U.S.-Japan direct investment : Dorothy B. Christelow. M.E. Sharpe, Armonk, NY, 1995; 240 pp," Journal of Asian Economics, Elsevier, Elsevier, vol. 6(4), pages 589-593.


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