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Foreign Ownership and Firm Value in Japan

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  • Park, Kwangwoo
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    I examine the relation between Tobin's Q and the structure of foreign equity ownership for a sample of 945 industrial firms listed in the 1st Section of the Tokyo Stock Exchange. I find evidence of significant curvilinear relation between Q and the fraction of common stocks owned by foreigners in Japan. Q rises until foreign ownership reaches approximately 40% to 45%, then falls back. It appears that, in Japan, foreign institutional investors are good monitors, and foreign industrial firms increase their stakes after firms showing poor operating performance. I also find that R&D intensity and foreign ownership have weaker but a similar pattern of concave nonlinear relationship in Japan. Future research will add variables like foreign CEO appointments and the fraction of foreign members serving in the board, and examine how these variables can affect firm value in Japan.

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    Paper provided by Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University in its series CEI Working Paper Series with number 2002-15.

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    Length: 44 p.
    Date of creation: Sep 2002
    Handle: RePEc:hit:hitcei:2002-15
    Note: First Version: January 11, 2001; This Version: June 18, 2002
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