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Part-Paid Stock, Corporate Finance, and Investment: Economic Consequences of the Part-Paid Stock System and Supplementary Installments in the Early 1930s of Japan


  • Takashi Nanjo

    (Deputy Director and Institute for Monetary and Economic Studies (IMES), Bank of Japan (E-mail:

  • Makoto Kasuya

    (Professor, University of Tokyo (E-mail:


Under Japan fs prewar capital stock system of joint-stock companies, rather than paying the full face value of a share in one lump sum, shareholders paid for stocks in multiple installments. This system was transplanted from industrialized Western nations during the Meiji Era to make it easier for investors to buy company shares and to promote capital concentrations. Company directors determined the amount of supplementary installments on part-paid stocks and when these installments were paid. The Commercial Code and Corporate articles of association specified sanctions for nonpayment, giving companies the backing needed to call in supplementary installments. Supplementary installments functioned as a last resort for corporate fund-raising in times of financial distress and played a role in corporate cash management and investment. Studies of historical documents such as financial statements and company histories show that in the early 1930s of the Great Depression, in a time of tight financial markets, many companies raised funds through supplementary installments, applying these funds to make investments and repay debts. As part of our study, we construct a new corporate financial data set with data on supplementary installments encompassing 174 firms, based on the Mitsubishi Economic Research Institute fs Honpo Jigyo-Seiseki Bunseki (Performance analysis of Japanese companies) and Toyo Keizai fs Kabushiki Gaisha Nenkan ( Company Year Book) and estimate cross-sectional investment functions for the fiscal year of 1932. Regression results suggest that while corporate investments were subject to liquidity and debt constraints, supplementary installments stabilized corporate cash management and promoted corporate investment activities.

Suggested Citation

  • Takashi Nanjo & Makoto Kasuya, 2009. "Part-Paid Stock, Corporate Finance, and Investment: Economic Consequences of the Part-Paid Stock System and Supplementary Installments in the Early 1930s of Japan," IMES Discussion Paper Series 09-E-22, Institute for Monetary and Economic Studies, Bank of Japan.
  • Handle: RePEc:ime:imedps:09-e-22

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    References listed on IDEAS

    1. Bernanke, Ben S, 1995. "The Macroeconomics of the Great Depression: A Comparative Approach," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(1), pages 1-28, February.
    2. Takeo Hoshi & Anil Kashyap, 2004. "Corporate Financing and Governance in Japan: The Road to the Future," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262582481, January.
    3. Miwa, Yoshiro & Ramseyer, J Mark, 2002. "Banks and Economic Growth: Implications from Japanese History," Journal of Law and Economics, University of Chicago Press, vol. 45(1), pages 127-164, April.
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    More about this item


    part-paid stock; joint-stock company; corporate finance; investment; financial system; interwar period; Great Depression;

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • N15 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Asia including Middle East
    • N25 - Economic History - - Financial Markets and Institutions - - - Asia including Middle East

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