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The Value Information of Financing Decisions and Corporate Governance during and after the Japanese Deregulation

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  • Xueping Wu

    (City University of Hong Kong)

  • Lily Li Xu

    (Fudan University)

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    Abstract

    Using Fama and French's (1998) framework, we investigate how financing decisions and corporate governance affect firm value, during and after the Japanese deregulation of 1974-97. We find that the value information is especially strong in the case of adverse keiretsu effects on bank financing in the 1980s, suggesting that keiretsu hands-on corporate governance and finance caused more costs than benefits. There is also strong evidence that Japan's deregulation changed the value information of corporate financing decisions and made it more compatible with a market-oriented financial system. This presaged the waning of traditional keiretsu corporate governance in Japan.

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    Bibliographic Info

    Article provided by University of Chicago Press in its journal Journal of Business.

    Volume (Year): 78 (2005)
    Issue (Month): 1 (January)
    Pages: 243-280

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    Handle: RePEc:ucp:jnlbus:v:78:y:2005:i:1:p:243-280

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    Web page: http://www.journals.uchicago.edu/JB/

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    Cited by:
    1. Yener Altunbaş & Alper Kara & Adrian van Rixtel, 2007. "Corporate governance and corporate ownership: The investment behaviour of Japanese institutional investors," Banco de Espa�a Occasional Papers 0703, Banco de Espa�a.
    2. Wu, Xueping & Yao, Jun, 2012. "Understanding the rise and decline of the Japanese main bank system: The changing effects of bank rent extraction," Journal of Banking & Finance, Elsevier, vol. 36(1), pages 36-50.
    3. Toru Yoshikawa & Jean McGuire, 2008. "Change and continuity in Japanese corporate governance," Asia Pacific Journal of Management, Springer, vol. 25(1), pages 5-24, January.
    4. Sandra Dow & Jean McGuire & Toru Yoshikawa, 2011. "Disaggregating the group effect: Vertical and horizontal keiretsu in changing economic times," Asia Pacific Journal of Management, Springer, vol. 28(2), pages 299-323, June.
    5. Wu, Xueping & Sercu, Piet & Yao, Jun, 2009. "Does competition from new equity mitigate bank rent extraction? Insights from Japanese data," Journal of Banking & Finance, Elsevier, vol. 33(10), pages 1884-1897, October.
    6. Chernobai, Anna & Yasuda, Yukihiro, 2013. "Disclosures of material weaknesses by Japanese firms after the passage of the 2006 Financial Instruments and Exchange Law," Journal of Banking & Finance, Elsevier, vol. 37(5), pages 1524-1542.
    7. Wu, Xueping & Au Yeung, Chau Kin, 2012. "Firm growth type and capital structure persistence," Journal of Banking & Finance, Elsevier, vol. 36(12), pages 3427-3443.
    8. Jean McGuire & Sandra Dow, 2009. "Japanese keiretsu: Past, present, future," Asia Pacific Journal of Management, Springer, vol. 26(2), pages 333-351, June.

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