IDEAS home Printed from https://ideas.repec.org/a/red/issued/10-34.html
   My bibliography  Save this article

Japan's Intangible Capital and Valuation of Corporations in a Neoclassical Framework

Author

Listed:
  • Hiroki Arato

    (Tokyo Metropolitan University)

  • Katsunori Yamada

    (Osaka University)

Abstract

This paper estimates the economic value in the 1980s and 1990s of corporate assets in Japan, including both tangible and intangible assets, based on the neoclassical framework of McGrattan and Prescott (2005). Our estimates use a new micro-data set that comprises the accounting statements of all listed, non-financial companies in Japan. We find that in 1980-86, a period that immediately preceded Japan's so-called ``bubble economy", our assessed value of corporate productive assets, net of the value of corporate debt, is approximately equal to the actual stock market value of Japanese corporate equity. The finding differs from previous results based on studies of aggregate data sets or based on studies of micro data sets that neglected intangible capital. We also show that the Japanese ratio of the amount of intangible capital stock to the amount of tangible capital stock is comparable to the analogous ratios for the U.S. and U.K. (Copyright: Elsevier)

Suggested Citation

  • Hiroki Arato & Katsunori Yamada, 2012. "Japan's Intangible Capital and Valuation of Corporations in a Neoclassical Framework," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 15(4), pages 459-478, October.
  • Handle: RePEc:red:issued:10-34
    DOI: 10.1016/j.red.2012.01.001
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1016/j.red.2012.01.001
    Download Restriction: Access to full texts is restricted to ScienceDirect subscribers and institutional members. See http://www.sciencedirect.com/ for details.

    File URL: https://libkey.io/10.1016/j.red.2012.01.001?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Lin, Xiaoji, 2012. "Endogenous technological progress and the cross-section of stock returns," Journal of Financial Economics, Elsevier, vol. 103(2), pages 411-427.
    2. R. Anton Braun & Daisuke Ikeda & Douglas H. Joines, 2006. "Saving and interest rates in Japan: Why they have fallen and why they will remain low," Proceedings, Federal Reserve Bank of San Francisco, issue Jun.
    3. Robert E. Hall, 2001. "The Stock Market and Capital Accumulation," American Economic Review, American Economic Association, vol. 91(5), pages 1185-1202, December.
    4. Carol Corrado & Charles Hulten & Daniel Sichel, 2009. "Intangible Capital And U.S. Economic Growth," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 55(3), pages 661-685, September.
    5. Selahattin Imrohoroglu & Ayse Imrohoroglu & Kaiji Chen, 2006. "The Japanese Saving Rate," American Economic Review, American Economic Association, vol. 96(5), pages 1850-1858, December.
    6. Tronconi, Claudia & Vittucci Marzetti, Giuseppe, 2011. "Organization capital and firm performance. Empirical evidence for European firms," Economics Letters, Elsevier, vol. 112(2), pages 141-143, August.
    7. Mauro Giorgio Marrano & Jonathan Haskel & Gavin Wallis, 2009. "What Happened To The Knowledge Economy? Ict, Intangible Investment, And Britain'S Productivity Record Revisited," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 55(3), pages 686-716, September.
    8. Fumio Hayashi & Edward C. Prescott, 2004. "The 1990s in Japan: a lost decade," Chapters, in: Paolo Onofri (ed.), The Economics of an Ageing Population, chapter 2, Edward Elgar Publishing.
    9. Kyoji Fukao & Tsutomu Miyagawa & Kentaro Mukai & Yukio Shinoda & Konomi Tonogi, 2009. "Intangible Investment In Japan: Measurement And Contribution To Economic Growth," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 55(3), pages 717-736, September.
    10. Ellen R. McGrattan & Edward C. Prescott, 2010. "Technology Capital and the US Current Account," American Economic Review, American Economic Association, vol. 100(4), pages 1493-1522, September.
    11. Dirk Czarnitzki & Kornelius Kraft, 2010. "On the profitability of innovative assets," Applied Economics, Taylor & Francis Journals, vol. 42(15), pages 1941-1953.
    12. Ellen R. McGrattan & Edward C. Prescott, 2005. "Taxes, Regulations, and the Value of U.S. and U.K. Corporations," Review of Economic Studies, Oxford University Press, vol. 72(3), pages 767-796.
    13. Kazuo Ogawa & Shin-Ichi Kitasaka, 1999. "Market Valuation and the q Theory of Investment," The Japanese Economic Review, Japanese Economic Association, vol. 50(2), pages 191-211, June.
    14. Albert Ando & Dimitrios Christelis & Tsutomu Miyagawa, 2003. "Inefficiency of Corporate Investment and Distortion of Savings Behavior in Japan," NBER Chapters, in: Structural Impediments to Growth in Japan, pages 155-190, National Bureau of Economic Research, Inc.
    15. Hoshi, Takeo & Kashyap, Anil K., 1990. "Evidence on q and investment for Japanese firms," Journal of the Japanese and International Economies, Elsevier, vol. 4(4), pages 371-400, December.
    16. Jean-Pierre Danthine & Xiangrong Jin, 2007. "Intangible capital, corporate valuation and asset pricing," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 32(1), pages 157-177, July.
    17. Sami Alpanda, 2012. "Taxation, collateral use of land, and Japanese asset prices," Empirical Economics, Springer, vol. 43(2), pages 819-850, October.
    18. Hayashi, Fumio & Inoue, Tohru, 1991. "The Relation between Firm Growth and Q with Multiple Capital Goods: Theory and Evidence from Panel Data on Japanese Firms," Econometrica, Econometric Society, vol. 59(3), pages 731-753, May.
    19. Nakajima, Tomoyuki, 2008. "Asset price fluctuations in Japan: 1980-2000," Japan and the World Economy, Elsevier, vol. 20(1), pages 129-153, January.
    20. Alfredo Martín‐Oliver & Vicente Salas‐Fumás, 2011. "It Investment And Intangibles: Evidence From Banks," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 57(3), pages 513-535, September.
    21. Ando, Albert, 2002. "Missing Household Saving and Valuation of Corporations: Inquiry into Japanese National Accounts I," Journal of the Japanese and International Economies, Elsevier, vol. 16(2), pages 147-176, June.
    22. Keiichi Hori & Makoto Saito & Koichi Ando, 2006. "What Caused Fixed Investment To Stagnate During The 1990s In Japan? Evidence From Panel Data Of Listed Companies," The Japanese Economic Review, Japanese Economic Association, vol. 57(2), pages 283-306, June.
    23. Yuichi Fukuta, 2002. "A test for rational bubbles in stock prices," Empirical Economics, Springer, vol. 27(4), pages 587-600.
    24. Ishi, Hiromitsu, 2001. "The Japanese Tax System," OUP Catalogue, Oxford University Press, edition 3, number 9780199242566.
    25. Jiao, Yawen, 2010. "Stakeholder welfare and firm value," Journal of Banking & Finance, Elsevier, vol. 34(10), pages 2549-2561, October.
    26. Andrew Atkeson & Patrick J. Kehoe, 2005. "Modeling and Measuring Organization Capital," Journal of Political Economy, University of Chicago Press, vol. 113(5), pages 1026-1053, October.
    27. Magnus Blomström & Jennifer Corbett & Fumio Hayashi & Anil Kashyap, 2003. "Structural Impediments to Growth in Japan," NBER Books, National Bureau of Economic Research, Inc, number blom03-1, May.
    28. Hayashi, Fumio & Nomura, Koji, 2005. "Can IT be Japan's savior?," Journal of the Japanese and International Economies, Elsevier, vol. 19(4), pages 543-567, December.
    29. Carol A. Corrado & Charles R. Hulten, 2010. "How Do You Measure a "Technological Revolution"?," American Economic Review, American Economic Association, vol. 100(2), pages 99-104, May.
    30. Alpanda, Sami, 2007. "The Boom-Bust Cycle in Japanese Asset Prices," MPRA Paper 5895, University Library of Munich, Germany.
    31. Takatoshi Ito & Tokuo Iwaisako, 1996. "Explaining Asset Bubbles in Japan," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 14(1), pages 143-193, July.
    32. Pantzalis, Christos & Park, Jung Chul, 2009. "Equity market valuation of human capital and stock returns," Journal of Banking & Finance, Elsevier, vol. 33(9), pages 1610-1623, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Razzak, Weshah, 2013. "An Empirical Study of Sectoral-Level Capital Investments in New Zealand," MPRA Paper 52461, University Library of Munich, Germany.
    2. Akiyuki Tonogi, 2017. "Economic Growth Analysis of Japan by Dynamic General Equilibrium Model with R&D Investment," Public Policy Review, Policy Research Institute, Ministry of Finance Japan, vol. 13(3), pages 207-240, November.
    3. Ellen R. McGrattan & Kazuaki Miyachi & Adrian Peralta-Alva, 2019. "On Financing Retirement, Health Care, and Long-Term Care in Japan," Staff Report 586, Federal Reserve Bank of Minneapolis.
    4. Shenglang Yang, 2016. "Intangible capital and sectoral energy intensity: Evidence from 40 economies," ANU Working Papers in Economics and Econometrics 2016-646, Australian National University, College of Business and Economics, School of Economics.
    5. HOSONO Kaoru & MIYAKAWA Daisuke & TAKIZAWA Miho & YAMANOUCHI Kenta, 2016. "Complementarity and Substitutability between Tangible and Intangible Capital: Evidence from Japanese firm-level data," Discussion papers 16024, Research Institute of Economy, Trade and Industry (RIETI).
    6. Yang, Shenglang & Shi, Xunpeng, 2018. "Intangible capital and sectoral energy intensity: Evidence from 40 economies between 1995 and 2007," Energy Policy, Elsevier, vol. 122(C), pages 118-128.
    7. Sami Alpanda, 2012. "Taxation, collateral use of land, and Japanese asset prices," Empirical Economics, Springer, vol. 43(2), pages 819-850, October.
    8. MIYAGAWA Tsutomu & TAKIZAWA Miho & EDAMURA Kazuma, 2013. "Does the Stock Market Evaluate Intangible Assets? An empirical analysis using data of listed firms in Japan," Discussion papers 13052, Research Institute of Economy, Trade and Industry (RIETI).
    9. Adrian Peralta-Alva & Kazuaki Miyachi & Ellen R. McGrattan, 2018. "On Financing Retirement, Health, and Long-term Care in Japan," IMF Working Papers 2018/249, International Monetary Fund.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Shenglang Yang, 2016. "Intangible capital and sectoral energy intensity: Evidence from 40 economies," ANU Working Papers in Economics and Econometrics 2016-646, Australian National University, College of Business and Economics, School of Economics.
    2. Sami Alpanda, 2012. "Taxation, collateral use of land, and Japanese asset prices," Empirical Economics, Springer, vol. 43(2), pages 819-850, October.
    3. Kyoji Fukao, 2013. "Explaining Japan's Unproductive Two Decades," Asian Economic Policy Review, Japan Center for Economic Research, vol. 8(2), pages 193-213, December.
    4. Hiroyuki Kasahara & Yasuyuki Sawada & Michio Suzuki, 2016. "Monetary Policy and Covered Interest Parity in the Post GFC Period: Evidence from the Australian Dollar and the NZ Dollar," CIRJE F-Series CIRJE-F-1033, CIRJE, Faculty of Economics, University of Tokyo.
    5. Wen Chen, 2018. "Cross‐Country Income Differences Revisited: Accounting for the Role of Intangible Capital," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 64(3), pages 626-648, September.
    6. Mitra, Shalini, 2018. "Intangible Capital and the Rise in Wage and Hours Volatility," MPRA Paper 89697, University Library of Munich, Germany.
    7. Peters, Ryan H. & Taylor, Lucian A., 2017. "Intangible capital and the investment-q relation," Journal of Financial Economics, Elsevier, vol. 123(2), pages 251-272.
    8. Hiroyuki Kasahara & Yasuyuki Sawada & Michio Suzuki, 2016. "The Effect of Bank Recapitalization Policy on Corporate Investment: Evidence from a Banking Crisis in Japan," CARF F-Series CARF-F-399, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
    9. Che, Natasha Xingyuan, 2009. "Sectoral Structural Change in a Knowledge Economy," MPRA Paper 19653, University Library of Munich, Germany.
    10. Bridgman, Benjamin, 2014. "Do intangible assets explain high U.S. foreign direct investment returns?," Journal of Macroeconomics, Elsevier, vol. 40(C), pages 159-171.
    11. HOSONO Kaoru & MIYAKAWA Daisuke & TAKIZAWA Miho & YAMANOUCHI Kenta, 2016. "Complementarity and Substitutability between Tangible and Intangible Capital: Evidence from Japanese firm-level data," Discussion papers 16024, Research Institute of Economy, Trade and Industry (RIETI).
    12. Arrighetti, Alessandro & Landini, Fabio & Lasagni, Andrea, 2014. "Intangible assets and firm heterogeneity: Evidence from Italy," Research Policy, Elsevier, vol. 43(1), pages 202-213.
    13. Jose Ignacio Lopez & Virginia Olivella, 2018. "The importance of intangible capital for the transmission of financial shocks," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 30, pages 223-238, October.
    14. Borovička, Jaroslav & Hansen, Lars Peter, 2014. "Examining macroeconomic models through the lens of asset pricing," Journal of Econometrics, Elsevier, vol. 183(1), pages 67-90.
    15. De, Supriyo, 2014. "Intangible capital and growth in the ‘new economy’: Implications of a multi-sector endogenous growth model," Structural Change and Economic Dynamics, Elsevier, vol. 28(C), pages 25-42.
    16. Nicholas Oulton, 2013. "Medium and long run prospects for UK growth in the aftermath of the financial crisis," Discussion Papers 1307, Centre for Macroeconomics (CFM).
    17. Otsu, Keisuke & Saito, Masashi, 2013. "Organizational dynamics and aggregate fluctuations: The role of financial relationships," Journal of Economic Dynamics and Control, Elsevier, vol. 37(12), pages 3044-3058.
    18. Carol A. Corrado & Charles R. Hulten, 2014. "Innovation Accounting," NBER Chapters, in: Measuring Economic Sustainability and Progress, pages 595-628, National Bureau of Economic Research, Inc.
    19. Carol Corrado & Jonathan Haskel & Cecilia Jona-Lasinio, 2017. "Knowledge Spillovers, ICT and Productivity Growth," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 79(4), pages 592-618, August.
    20. Mariela Dal Borgo & Peter Goodridge & Jonathan Haskel & Annarosa Pesole, 2013. "Productivity and Growth in UK Industries: An Intangible Investment Approach," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 75(6), pages 806-834, December.

    More about this item

    Keywords

    Intangible capital; Fundamental value of corporations; Accounting information;
    All these keywords.

    JEL classification:

    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:red:issued:10-34. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://edirc.repec.org/data/sedddea.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Christian Zimmermann (email available below). General contact details of provider: https://edirc.repec.org/data/sedddea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.