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Does Ownership Matter? Evidence from the Zaibatsu Dissolution Program

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  • Yoshiro Miwa

    (Faculty of Economics, Universtiy of Tokyo)

  • J. Mark Ramseyer

    (Harvard Law School/CIRJE, University of Tokyo)

Abstract

In 1985, Demsetz & Lehn argued both that the optimal corporate ownership structure was firm-specific, and that market competition would drive firms toward that optimum. Because ownership was endogenous to expected performance, they cautioned, any regression of profitability on ownership patterns should yield insignificant results. To test the Demsetz- Lehn hypothesis, we use the zaibatsu dissolution program from late-1940s Japan as an exogenous shock to the pre -war ownership equilibrium. Through that program, the U.S. -run occupation removed the more prominent shareholders from many of the most successful Japanese companies. By focusing on the effect the program had on profitability and on the way firms responded to the program, we accomplish two goals: (a) we avoid the endogeneity problem that has plagued much of the other research on the subject, and (b) we clarify the equilibrating dynamics by which competitive markets move firms toward their optimal ownership structure. With a sample of 637 Japanese firms for 1953 and 710 for 1958, we confirm the equilibrating mechanism behind Demsetz-Lehn: between 1953 and 1958, the ex- zaibatsu firms did significantly reconcentrate their ownership structure. As of 1953, the unlisted ex-zaibatsu and new firms still had not yet been able to negotiate the transactions necessary to approach their optimum ownership structures, and even the listed firms had not fully undone the effect of the occupation-induced changes on managerial practices. By 1958 they had, and the earlier correlation between profitability and ownership disappeared. By then, firm profitability showed no correlation with ownership, whether under linear, quadratic, or piecewise specifications. We further find no evidence that ex- zaibatsu firms sought to strengthen their ties to banks over 1953 - 58.

Suggested Citation

  • Yoshiro Miwa & J. Mark Ramseyer, 2001. "Does Ownership Matter? Evidence from the Zaibatsu Dissolution Program," CIRJE F-Series CIRJE-F-105, CIRJE, Faculty of Economics, University of Tokyo.
  • Handle: RePEc:tky:fseres:2001cf105
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    References listed on IDEAS

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    Cited by:

    1. Pertti Haaparanta & Tuuli Juurikkala & Olga Lazareva & Jukka Pirttila & Laura Solanko & Ekaterina Zhuravskaya, 2003. "Firms And Public Service Provision In Russia," Working Papers w0041, Center for Economic and Financial Research (CEFIR).
    2. Miwa, Yoshiro & Ramseyer, J. Mark, 2006. "The Fable of the Keiretsu," University of Chicago Press Economics Books, University of Chicago Press, edition 0, number 9780226532707.
    3. Yoshiro Miwa & J. Mark Ramseyer, 2003. "Does Relationship Banking Matter? Japanese Bank-Borrower Ties in Good Times and Bad," CIRJE F-Series CIRJE-F-239, CIRJE, Faculty of Economics, University of Tokyo.
    4. Sergei Guriev & Andrei Rachinsky, 2005. "The Role of Oligarchs in Russian Capitalism," Journal of Economic Perspectives, American Economic Association, vol. 19(1), pages 131-150, Winter.
    5. Christian Weiss & Stefan Hilger, 2012. "Ownership concentration beyond good and evil: is there an effect on corporate performance?," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 16(4), pages 727-752, November.
    6. Yoshiro Miwa & J. Mark Ramseyer, 2005. "The Good Occupation," CIRJE F-Series CIRJE-F-340, CIRJE, Faculty of Economics, University of Tokyo.

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