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The Genesis and the Development of the Pre-war Japanese Stock Market

Author

Listed:
  • Tetsuji Okazaki

    (Faculty of Economics, University of Tokyo)

  • Yasushi Hamao

    (Marshall School of Business, University of Southern California)

  • Takeo Hoshi

    (Graduate School of International Relations and Pacific Studies, University of California, San Diego)

Abstract

This paper examines the development of the Tokyo Stock Exchange since its inception in 1878 to the mid-1930s. Special attention is paid to the increases in the number of listed stocks throughout this period. By the mid-1930s, the Tokyo Stock Exchange had grown to a market bigger (measured relative to GDP) than many contemporary stock exchanges in major economies. Even compared with the stock exchanges in major countries today, the pre-war Tokyo Stock Exchange was quite large. New listings in the spot market section of the Tokyo Stock Exchange were not restricted for most of this period. Our regression analysis reveals that many firms decided to list their stocks on the Tokyo Stock Exchange as they became older and bigger. The commercial code change in 1911, which increased the protection of outside shareholders, also had a positive impact on the listings on the Tokyo Stock Exchange. The Tokyo Stock Exchange reform of 1918 that aimed at standardization of the spot transactions increased the listings on the Exchange. The analysis also suggests that in the earlier period, there was a "home bias" that the companies located in the Eastern part of Japan (closer to the Tokyo Stock Exchange) were more likely to be listed in the Tokyo Stock Exchange, but the effect diminished after the Exchange reform of 1918.

Suggested Citation

  • Tetsuji Okazaki & Yasushi Hamao & Takeo Hoshi, 2004. "The Genesis and the Development of the Pre-war Japanese Stock Market," CARF J-Series CARF-J-007, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
    • Handle: RePEc:cfi:jseres:cj007
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    File URL: http://www.carf.e.u-tokyo.ac.jp/pdf/workingpaper/jseries/10.pdf
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    Cited by:

    1. Kazuki Onji & John P. Tang, 2015. "A nation without a corporate income tax: Evidence from nineteenth century Japan," Discussion Papers in Economics and Business 15-12, Osaka University, Graduate School of Economics.
    2. Onji, Kazuki & Tang, John P., 2017. "Taxes and the Choice of Organizational Form in Late Nineteenth Century Japan," The Journal of Economic History, Cambridge University Press, vol. 77(2), pages 440-472, June.
    3. Grossman, Richard S. & Imai, Masami, 2008. "The evolution of a national banking market in pre-war Japan," Explorations in Economic History, Elsevier, vol. 45(1), pages 17-29, January.

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