How do financialization trends differ between parent companies and corporate groups : Evidence from Japanese manufacturing corporations

This study aims to examine financialization in non-financial corporations (NFCs) by a new analytical method. Using both parent-only and consolidated financial statements, we reveal the complete picture of financialization in Japanese manufacturing corporations from the perspectives of both parent companies and corporate groups. We show that financialization trends differ significantly between parent companies and corporate groups. In particular, the content of financial assets held by corporations and the trend of financial revenues are quite different between them. After demonstrating the financialization trends, this study further investigates the determinants of financial revenues in Japanese manufacturing corporations, focusing on the difference in the level of financial revenues between parent companies and corporate groups. By panel data analysis, we clarify that financial revenues in parent companies have been much larger than those in corporate groups because only parent companies need to increase their financial revenues to cover dividend payments. Our analysis shows that as globalization progresses, Japanese manufacturing parent companies absorb a large amount of financial revenues from overseas subsidiaries and affiliates to pay dividends to shareholders. This behavior of the parent companies is a typical example of how financialization interacts with globalization.