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Wartime Controls, Political Connections, and the Pricing of Zaibatsu Rents in Japan, 1930-1943

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  • Keiichi Morimoto
  • Akihiko Noda
  • Takenobu Yuki

Abstract

This paper examines how wartime economic controls shaped stock-price formation in Japan from 1930 to 1943. We develop a four-portfolio asset-pricing model in which zaibatsu affiliation affects expected payoffs and the translation of valuations into economic scale through lower financing wedges. We then construct daily capitalization-weighted indices and four benchmark portfolios based on a two-by-two sort by zaibatsu affiliation and military orientation. Using a CAPM-AR(p)-SV event-study framework that allows for serial correlation and stochastic volatility, we show that the model rationalizes capitalization concentration, segmented abnormal returns, delayed cumulative adjustment, regime-risk insulation of zaibatsu portfolios, and zaibatsu-concentrated responses to embedded-rent or group-continuation shocks. The evidence is consistent not with a collapse of semi-strong efficiency, but with institutionally contingent efficiency: stock prices continued to respond to news while capitalizing uneven access to credit, materials, and procurement.

Suggested Citation

  • Keiichi Morimoto & Akihiko Noda & Takenobu Yuki, 2026. "Wartime Controls, Political Connections, and the Pricing of Zaibatsu Rents in Japan, 1930-1943," Papers 2605.21009, arXiv.org.
    • Handle: RePEc:arx:papers:2605.21009
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