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Macro Effects of Corporate Restructuring in Japan

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  • Se-Jik Kim
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    Abstract

    This paper presents a framework for quantitatively evaluating the macroeconomic effects of corporate restructuring and applies it to Japan. Using firm-level financial statement data, it estimates total factor productivity (TFP) of individual Japanese firms. Given the estimated distribution of productivity across firms, the paper simulates the effect of optimal restructuring, that is, reallocation of resources from less-productive firms to more-productive ones, on the dynamic path of aggregate output. The results show that the benefits of restructuring could substantially exceed the costs.

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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 03/203.

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    Length: 33
    Date of creation: 01 Oct 2003
    Date of revision:
    Handle: RePEc:imf:imfwpa:03/203

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    Related research

    Keywords: Labor; Capital; corporate restructuring; aggregate demand; labor income; capital income; aggregate supply; corporate governance; aggregate consumption; capital market; human capital; corporate performance; permanent income; corporate debts; corporate finance; consumption demand; corporate accounting; corporate liquidation;

    References

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    1. Kazuo Ogawa, 2003. "Financial Distress and Employment: The Japanese Case in the 90s," NBER Working Papers 9646, National Bureau of Economic Research, Inc.
    2. Kenneth Kang & Hong Liang & Henry Ma & Anthony J. Richards & Ajai Chopra & Meral Karasulu, 2001. "From Crisis to Recovery in Korea," IMF Working Papers 01/154, International Monetary Fund.
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    4. Hoshi, Takeo & Kashyap, Anil & Scharfstein, David, 1990. "The role of banks in reducing the costs of financial distress in Japan," Journal of Financial Economics, Elsevier, vol. 27(1), pages 67-88, September.
    5. Daron Acemoglu & Simon Johnson & James Robinson & Yunyong Thaicharoen, 2002. "Institutional Causes, Macroeconomic Symptoms: Volatility, Crises and Growth," NBER Working Papers 9124, National Bureau of Economic Research, Inc.
    6. Kaplan, Steven N. & Minton, Bernadette A., 1994. "Appointments of outsiders to Japanese boards: Determinants and implications for managers," Journal of Financial Economics, Elsevier, vol. 36(2), pages 225-258, October.
    7. Raghuram G. Rajan & Luigi Zingales, 1998. "Which Capitalism? Lessons Form The East Asian Crisis," Journal of Applied Corporate Finance, Morgan Stanley, vol. 11(3), pages 40-48.
    8. Joe Peek & Eric S. Rosengren, 2003. "Unnatural Selection: Perverse Incentives and the Misallocation of Credit in Japan," NBER Working Papers 9643, National Bureau of Economic Research, Inc.
    9. Kamada, Koichiro & Masuda, Kazuto, 2001. "Effects of Measurement Error on the Output Gap in Japan," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 19(2), pages 109-154, May.
    10. Robert E. Lucas & Jr., 1967. "Adjustment Costs and the Theory of Supply," Journal of Political Economy, University of Chicago Press, vol. 75, pages 321.
    11. Simon Johnson & John McMillan & Christopher Woodruff, 2002. "Property Rights and Finance," American Economic Review, American Economic Association, vol. 92(5), pages 1335-1356, December.
    12. Ruhm, Christopher J, 1991. "Are Workers Permanently Scarred by Job Displacements?," American Economic Review, American Economic Association, vol. 81(1), pages 319-24, March.
    13. Fama, Eugene F., 1985. "What's different about banks?," Journal of Monetary Economics, Elsevier, vol. 15(1), pages 29-39, January.
    14. Anil K. Kashyap, 2002. "Sorting out Japan's financial crisis," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q IV, pages 42-55.
    15. Luc E. Leruth & Yougesh Khatri & J. Piesse, 2002. "Corporate Performance and Governance in Malaysia," IMF Working Papers 02/152, International Monetary Fund.
    16. Yasushi Hamao & Jianping Mei & Yexiao Xu, 2003. "Idiosyncratic Risk and the Creative Destruction in Japan," NBER Working Papers 9642, National Bureau of Economic Research, Inc.
    17. Valerie A. Ramey & Matthew D. Shapiro, 2001. "Displaced Capital: A Study of Aerospace Plant Closings," Journal of Political Economy, University of Chicago Press, vol. 109(5), pages 958-992, October.
    18. Kaplan, Steven N, 1994. "Top Executive Rewards and Firm Performance: A Comparison of Japan and the United States," Journal of Political Economy, University of Chicago Press, vol. 102(3), pages 510-46, June.
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    Cited by:
    1. Alan Ahearne & Naoki Shinada, 2005. "Zombie firms and economic stagnation in Japan," International Economics and Economic Policy, Springer, vol. 2(4), pages 363-381, December.
    2. Kazunari Ohashi & Manmohan Singh, 2004. "Japan's Distressed Debt Market," IMF Working Papers 04/86, International Monetary Fund.

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