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KeiretsuAffiliation and Equity Values in Japan

Author

Listed:
  • Edward B. Douthett

    (School of Management, George Mason University, 4400 University Drive MSN 5F4, Fairfax, VA 22030, USA)

  • Kooyul Jung

    (Graduate School of Management, Korea Advanced Institute of Science and Technology, Seoul, Korea)

  • YoungKyu Park

    (Graduate School of Management, Korea Advanced Institute of Science and Technology, Seoul, Korea)

Abstract

This study examines the association betweenkeiretsuaffiliation and corporate equity value in Japan. We hypothesize that,ceteris paribus,keiretsufirm value, measured as Tobin's Q, is higher than non-keiretsufirm value, reflecting the improved or active monitoring role of thekeiretsuarrangement. The empirical tests are supportive after controlling for other financial and ownership variables. The results also show thatkeiretsufirm value is positively related to the strength of thekeiretsu. This is additional evidence that the monitoring provided by thekeiretsurelationship does indeed increase corporate equity value, and that the source of the increase in value is not merely a result of cross-shareholding, but inherent to thekeiretsuarrangement. However, the effect ofkeiretsumembership and influence on market equity values has apparently diminished since 1990 (the post-market crash period in Japan).

Suggested Citation

  • Edward B. Douthett & Kooyul Jung & YoungKyu Park, 2004. "KeiretsuAffiliation and Equity Values in Japan," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 7(04), pages 525-545.
    • Handle: RePEc:wsi:rpbfmp:v:07:y:2004:i:04:n:s0219091504000226
    DOI: 10.1142/S0219091504000226
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    Keywords

    Keiretsumonitoring and strength of influence; ownership structure; equity value; JEL Classification: G14; JEL Classification: G15; JEL Classification: G32;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services
    • G3 - Financial Economics - - Corporate Finance and Governance

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