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Factors Affecting Price Earnings Ratios and Market Values of Japanese Firms


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  • Richard L. Constand
  • Lewis P. Freitas
  • Michael J. Sullivan
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    This paper investigates cross-sectional explanations of Japanese PE ratios by focusing on two dependent variables, the percentage change in the PE ratio (PE) and the percentage change in the market value of equity (MV). Results of this study suggest that changes in the value of hidden assets such as land, changes in the patterns of ownership by Japanese individuals, and foreign investors, changes in expected earnings growth and earnings risk, and changes in dividends per share and dividend payout are significantly related to changes in PE ratios and market values. Our results, therefore, support the contention of French and Poterba that changes in land values appear to explain at least a portion of changes in Japanese PE ratios.

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    Bibliographic Info

    Article provided by Financial Management Association in its journal Financial Management.

    Volume (Year): 20 (1991)
    Issue (Month): 4 (Winter)

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    Handle: RePEc:fma:fmanag:constand91

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    Cited by:
    1. Nikbakht, Ehsan & Polat, Celaleddin, 1998. "A global perspective of P/E ratio determinants: The case of ADRs," Global Finance Journal, Elsevier, vol. 9(2), pages 253-267.
    2. Constand, Richard L. & Pace, R. Daniel, 1998. "Another look at corporate ownership in Japan," Global Finance Journal, Elsevier, vol. 9(1), pages 127-147.
    3. Prem Jain & Joshua Rosett, 2006. "Macroeconomic variables and the E/P ratio: Is inflation really positively associated with the E/P ratio?," Review of Quantitative Finance and Accounting, Springer, vol. 27(1), pages 5-26, August.
    4. Katz, Jeffrey P. & Werner, Steve & Brouthers, Lance, 1999. "Does Winning Mean the Same Thing around the World? National Ideology and the Performance of Global Competitors," Journal of Business Research, Elsevier, vol. 44(2), pages 117-126, February.


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