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Regulation, Competition, Diversification, Governance and Costs: An Empirical Analysis of Public Utility and Manufacturing Firms in Japan

Author

Listed:
  • Fumitoshi Mizutani

    (Graduate School of Business Administration, Kobe University)

  • Eri Nakamura

    (Faculty of Economics, Shinshu University)

Abstract

The main purpose of this study is to investigate how regulation, competition, governance structure, and business diversification strategy affect the cost structure of firms. By using 358 observations comprised of public utility firms and manufacturing firms from 1989 to 2002, we estimate the translog cost function. From our empirical analysis, the following results are obtained: (i) The regulation factor does not affect the cost structure. (ii) Compared with the regulation factor, the competition factor shows a quite clear effect on a firm' s cost reduction. (iii) As a company diversifies further from its core industry into other industries, all of the firm' s business costs increase, indicating an apparent lack of economies of scope. (iv) The governance factor has an important effect on a firm' s cost structure. As the ratio of foreign shareholders increases and there is more dependence on one main bank, the costs of a firm decrease.

Suggested Citation

  • Fumitoshi Mizutani & Eri Nakamura, 2013. "Regulation, Competition, Diversification, Governance and Costs: An Empirical Analysis of Public Utility and Manufacturing Firms in Japan," Discussion Papers 2013-25, Kobe University, Graduate School of Business Administration.
  • Handle: RePEc:kbb:dpaper:2013-25
    as

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    File URL: http://www.b.kobe-u.ac.jp/paper/2013_25.pdf
    File Function: First version, 2013
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Regulation; Competition; Governance; Diversification Strategy; Japanese Firms;

    JEL classification:

    • L5 - Industrial Organization - - Regulation and Industrial Policy
    • L6 - Industrial Organization - - Industry Studies: Manufacturing
    • L9 - Industrial Organization - - Industry Studies: Transportation and Utilities
    • M2 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics

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