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The Cost of Capital in Japan: Recent Evidence and Further Results


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  • Albert Ando
  • Alan J. Auerbach


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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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 3371.

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Date of creation: May 1990
Date of revision:
Publication status: published as Journal of the Japanese and International Economies, Vol. 4, No. 4, pp. 323-350, (1990).
Handle: RePEc:nbr:nberwo:3371

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Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Phone: 617-868-3900
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Cited by:
  1. Katzner, Donald W., 2001. "Explaining the Japanese economic miracle," Japan and the World Economy, Elsevier, vol. 13(3), pages 303-319, August.
  2. Bronwyn H. Hall, 1991. "Corporate Restructuring and Investment Horizons," NBER Working Papers 3794, National Bureau of Economic Research, Inc.
  3. Nobuhiro Kiyotaki & Kenneth D. West, 1996. "Business Fixed Investment and the Recent Business Cycle in Japan," NBER Chapters, in: NBER Macroeconomics Annual 1996, Volume 11, pages 277-344 National Bureau of Economic Research, Inc.
  4. 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, vol. 6(4), pages 589-593.
  5. Douglas Stone & William T. Ziemba, 1993. "Land and Stock Prices in Japan," Journal of Economic Perspectives, American Economic Association, vol. 7(3), pages 149-165, Summer.
  6. George Furstenberg, 1998. "From Worldwide Capital Mobility to International Financial Integration: A Review Essay," Open Economies Review, Springer, vol. 9(1), pages 53-84, January.
  7. 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.
  8. Anthony J. Richards, 1991. "The Cost of Equity Capital in Australia: What Can We Learn from International Equity Returns?," RBA Research Discussion Papers rdp9107, Reserve Bank of Australia.
  9. Shibakawa, Rinya, 1994. "Corporate Governance, Cost of Capital and Financial Distress," Hitotsubashi Journal of commerce and management, Hitotsubashi University, vol. 29(1), pages 1-14, December.


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