IDEAS home Printed from https://ideas.repec.org/p/tky/fseres/2001cf109.html
   My bibliography  Save this paper

The Fable of the Keiretsu

Author

Listed:
  • Yoshiro Miwa

    (Faculty of Economics, University of Tokyo)

  • J. Mark Ramseyer

    (Harvard Law School and CIRJE, Faculty of Economics, University of Tokyo)

Abstract

Central to so many accounts of post-war Japan, the keiretsu corporate groups have never had economic substance. Conceived by Marxists committed to locating "domination" by "monopoly capital," they found an early audience among western scholars searching for evidence of culture-specific group behavior in Japan. By the 1990s, they had moved into mainstream economic studies, and keiretsu dummies appeared in virtually all econometric regressions of Japanese industrial or corporate structure. Yet the keiretsu began as a figment of the academic imagination, and they remain that today. The most commonly used keiretsu roster first groups large financial institutions by their pre-war antecedents. It then assigns firms to a group if the sum of its loans from those institutions exceeds the amount it borrows from the next largest lender. Other rosters start by asking whether firm presidents meet occasionally with other presidents for lunch. Regardless of the definition used, cross-shareholdings were trivial even during the years when keiretsu ties were supposedly strongest, and membership has only badly proxied for "main bank" ties. Econometric studies basing "keiretsu dummies" on these rosters have produced predictably haphazard results: some are a function of misspecified equations, while others depend on outlying data points and some are specific to one keiretsu roster but not others. The only reliably robust results are the artifacts of the sample biases created by the definitions themselves.

Suggested Citation

  • Yoshiro Miwa & J. Mark Ramseyer, 2001. "The Fable of the Keiretsu," CIRJE F-Series CIRJE-F-109, CIRJE, Faculty of Economics, University of Tokyo.
  • Handle: RePEc:tky:fseres:2001cf109
    as

    Download full text from publisher

    File URL: http://www.cirje.e.u-tokyo.ac.jp/research/dp/2001/2001cf109.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Alchian, Armen A & Demsetz, Harold, 1972. "Production , Information Costs, and Economic Organization," American Economic Review, American Economic Association, vol. 62(5), pages 777-795, December.
    2. Ongena, Steven & Smith, David C., 2000. "What Determines the Number of Bank Relationships? Cross-Country Evidence," Journal of Financial Intermediation, Elsevier, vol. 9(1), pages 26-56, January.
    3. Kaplan, Steven N. & Minton, Bernadette A., 1994. "Appointments of outsiders to Japanese boards: Determinants and implications for managers," Journal of Financial Economics, Elsevier, vol. 36(2), pages 225-258, October.
    4. Kang, Jun-Koo & Shivdasani, Anil, 1995. "Firm performance, corporate governance, and top executive turnover in Japan," Journal of Financial Economics, Elsevier, vol. 38(1), pages 29-58, May.
    5. Yoshiro Miwa & J. Mark Ramseyer, 2003. "Does Ownership Matter? Evidence from the Zaibatsu Dissolution Program," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 12(1), pages 67-89, March.
    6. Takeo Hoshi & Anil Kashyap & David Scharfstein, 1991. "Corporate Structure, Liquidity, and Investment: Evidence from Japanese Industrial Groups," The Quarterly Journal of Economics, Oxford University Press, vol. 106(1), pages 33-60.
    7. Gary R. Saxonhouse, 1993. "What Does Japanese Trade Structure Tell Us about Japanese Trade Policy?," Journal of Economic Perspectives, American Economic Association, vol. 7(3), pages 21-43, Summer.
    8. Hoshi, Takeo & Kashyap, Anil & Scharfstein, David, 1990. "The role of banks in reducing the costs of financial distress in Japan," Journal of Financial Economics, Elsevier, vol. 27(1), pages 67-88, September.
    9. Horiuchi, Akiyoshi & Packer, Frank & Fukuda, Shinichi, 1988. "What role has the "Main Bank" played in Japan?," Journal of the Japanese and International Economies, Elsevier, vol. 2(2), pages 159-180, June.
    10. David E. Weinstein & Yishay Yafeh, 1998. "On the Costs of a Bank-Centered Financial System: Evidence from the Changing Main Bank Relations in Japan," Journal of Finance, American Finance Association, vol. 53(2), pages 635-672, April.
    11. Steven M. Fazzari & R. Glenn Hubbard & Bruce C. Petersen, 2000. "Investment-Cash Flow Sensitivities are Useful: A Comment on Kaplan and Zingales," The Quarterly Journal of Economics, Oxford University Press, vol. 115(2), pages 695-705.
    12. Prowse, Stephen D., 1990. "Institutional investment patterns and corporate financial behavior in the United States and Japan," Journal of Financial Economics, Elsevier, vol. 27(1), pages 43-66, September.
    13. Flath, David, 1996. "The Keiretsu Puzzle," Journal of the Japanese and International Economies, Elsevier, vol. 10(2), pages 101-121, June.
    14. Chirinko, Robert S., 1997. "Finance Constraints, Liquidity, and Investment Spending: Theoretical Restrictions and International Evidence," Journal of the Japanese and International Economies, Elsevier, vol. 11(2), pages 185-207, June.
    15. Hanazaki, Masaharu & Horiuchi, Akiyoshi, 2000. "Is Japan's Financial System Efficient?," Oxford Review of Economic Policy, Oxford University Press, vol. 16(2), pages 61-73, Summer.
    16. Demsetz, Harold & Lehn, Kenneth, 1985. "The Structure of Corporate Ownership: Causes and Consequences," Journal of Political Economy, University of Chicago Press, vol. 93(6), pages 1155-1177, December.
    17. Kang, Jun-Koo & Stulz, Rene M, 2000. "Do Banking Shocks Affect Borrowing Firm Performance? An Analysis of the Japanese Experience," The Journal of Business, University of Chicago Press, vol. 73(1), pages 1-23, January.
    18. Hayashi, Fumio & Inoue, Tohru, 1991. "The Relation between Firm Growth and Q with Multiple Capital Goods: Theory and Evidence from Panel Data on Japanese Firms," Econometrica, Econometric Society, vol. 59(3), pages 731-753, May.
    19. repec:fth:michin:337 is not listed on IDEAS
    20. Yoshiro Miwa & J. Mark Ramseyer, 2001. "Directed Credit? Capital Market Competition in High-Growth Japan," CIRJE F-Series CIRJE-F-132, CIRJE, Faculty of Economics, University of Tokyo.
    21. Berglof, Erik & Perotti, Enrico, 1994. "The governance structure of the Japanese financial keiretsu," Journal of Financial Economics, Elsevier, vol. 36(2), pages 259-284, October.
    22. Enrica Detragiache & Paolo Garella & Luigi Guiso, 2000. "Multiple versus Single Banking Relationships: Theory and Evidence," Journal of Finance, American Finance Association, vol. 55(3), pages 1133-1161, June.
    23. Fukuda, Atsuo & Hirota, Shinichi, 1996. "Main Bank Relationships and Capital Structure in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 10(3), pages 250-261, September.
    24. Jun‐Koo Kang & Anil Shivdasani & Takeshi Yamada, 2000. "The Effect of Bank Relations on Investment Decisions: An Investigation of Japanese Takeover Bids," Journal of Finance, American Finance Association, vol. 55(5), pages 2197-2218, October.
    25. Yoshiro Miwa & J. Mark Ramseyer, 2000. "Rethinking Relationship-Specific Investments: Subcontracting in the Japanese Automobile Industry," CIRJE F-Series CIRJE-F-70, CIRJE, Faculty of Economics, University of Tokyo.
    26. Robert Z. Lawrence, 1993. "Japan's Different Trade Regime: An Analysis with Particular Reference to Seiretsu," Journal of Economic Perspectives, American Economic Association, vol. 7(3), pages 3-19, Summer.
    27. Branstetter, Lee, 2000. "Vertical Keiretsu and Knowledge Spillovers in Japanese Manufacturing: An Empirical Assessment," Journal of the Japanese and International Economies, Elsevier, vol. 14(2), pages 73-104, June.
    28. 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.
    29. Beason, D., 1998. "Keiretsu affiliation and share price volatility in Japan," Pacific-Basin Finance Journal, Elsevier, vol. 6(1-2), pages 27-43, May.
    30. Tarun Khanna & Yishay Yafeh, 2000. "Business Groups and Risk Sharing around the World," Economics Series Working Papers 2001-FE-02, University of Oxford, Department of Economics.
    31. Robert M. Conroy & Kenneth M. Eades & Robert S. Harris, 2000. "A Test of the Relative Pricing Effects of Dividends and Earnings: Evidence from Simultaneous Announcements in Japan," Journal of Finance, American Finance Association, vol. 55(3), pages 1199-1227, June.
    32. Kang, Jun-Koo & Shivdasani, Anil, 1996. "Does the Japanese Governance System Enhance Shareholder Wealth? Evidence from the Stock-Price Effects of Top Management Turnover," Review of Financial Studies, Society for Financial Studies, vol. 9(4), pages 1061-1095.
    33. Kang, Jun-Koo & Shivdasani, Anil, 1997. "Corporate restructuring during performance declines in Japan," Journal of Financial Economics, Elsevier, vol. 46(1), pages 29-65, October.
    34. Robert Z. Lawrence, 1991. "Efficient or Exclusionist: The Import Behavior of Japanese Corporate Groups," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 22(1), pages 311-341.
    35. Randall Morck & Masao Nakamura, 1999. "Banks and Corporate Control in Japan," Journal of Finance, American Finance Association, vol. 54(1), pages 319-339, February.
    36. Morck, Randall & Nakamura, Masao & Shivdasani, Anil, 2000. "Banks, Ownership Structure, and Firm Value in Japan," The Journal of Business, University of Chicago Press, vol. 73(4), pages 539-567, October.
    37. Stephen D. Prowse, 1990. "Institutional investment patterns and corporate financial behavior in the U.S. and Japan," Finance and Economics Discussion Series 108, Board of Governors of the Federal Reserve System (U.S.).
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Chernobai, Anna & Yasuda, Yukihiro, 2013. "Disclosures of material weaknesses by Japanese firms after the passage of the 2006 Financial Instruments and Exchange Law," Journal of Banking & Finance, Elsevier, vol. 37(5), pages 1524-1542.
    2. Yener Altunbaş & Alper Kara & Adrian van Rixtel, 2007. "Corporate governance and corporate ownership: The investment behaviour of Japanese institutional investors," Occasional Papers 0703, Banco de España.
    3. Limpaphayom, Piman & Rogers, Daniel A. & Yanase, Noriyoshi, 2019. "Bank equity ownership and corporate hedging: Evidence from Japan," Journal of Corporate Finance, Elsevier, vol. 58(C), pages 765-783.
    4. Wu, Xueping & Yao, Jun, 2012. "Understanding the rise and decline of the Japanese main bank system: The changing effects of bank rent extraction," Journal of Banking & Finance, Elsevier, vol. 36(1), pages 36-50.
    5. Randall Morck & Bernard Yeung, 2017. "East Asian Financial and Economic Development," NBER Working Papers 23845, National Bureau of Economic Research, Inc.
    6. Brewer, Elijah III & Genay, Hesna & Hunter, William Curt & Kaufman, George G., 2003. "The value of banking relationships during a financial crisis: Evidence from failures of Japanese banks," Journal of the Japanese and International Economies, Elsevier, vol. 17(3), pages 233-262, September.
    7. Hiraki, Takato & Inoue, Hideaki & Ito, Akitoshi & Kuroki, Fumiaki & Masuda, Hiroyuki, 2003. "Corporate governance and firm value in Japan: Evidence from 1985 to 1998," Pacific-Basin Finance Journal, Elsevier, vol. 11(3), pages 239-265, July.
    8. Yishay Yafeh, 2002. "An International Perspective of Japan's Corporate Groups and their Prospects," NBER Working Papers 9386, National Bureau of Economic Research, Inc.
    9. Shin, G. Hwan & Fraser, Donald R. & Kolari, James W., 2003. "How does banking industry consolidation affect bank-firm relationships? Evidence from a large Japanese bank merger," Pacific-Basin Finance Journal, Elsevier, vol. 11(3), pages 285-304, July.
    10. Yoshiro Miwa & J. Mark Ramseyer, 2001. "The Myth of the Main Bank: Japan and Comparative Corporate Governance," CIRJE F-Series CIRJE-F-131, CIRJE, Faculty of Economics, University of Tokyo.
    11. Jean McGuire & Sandra Dow, 2009. "Japanese keiretsu: Past, present, future," Asia Pacific Journal of Management, Springer, vol. 26(2), pages 333-351, June.
    12. Kazuo Ogawa & Elmer Sterken & Ichiro Tokutsu, 2010. "Multiple Bank Relationships and the Main Bank System: Evidence from a Matched Sample of Japanese Small Firms and Main Banks," Contributions to Economics, in: Giorgio Calcagnini & Enrico Saltari (ed.), The Economics of Imperfect Markets, chapter 0, pages 73-90, Springer.
    13. Jeffrey D. Gramlich & Piman Limpaphayom & S. Ghon Rhee, 2002. "Taxes, Keiretsu Affiliation, and Income Shifting," Tinbergen Institute Discussion Papers 02-114/2, Tinbergen Institute.
    14. Kojima, Koji & Adhikary, Bishnu Kumar & Mitra, Ranjan Kumar, 2017. "Does equity holding by main banks affect the earnings quality of client firms? Empirical evidence from Japan," Journal of Multinational Financial Management, Elsevier, vol. 42, pages 56-73.
    15. Yu, Hai-Chin & Sopranzetti, Ben J. & Lee, Cheng-Few, 2012. "Multiple banking relationships, managerial ownership concentration and firm value: A simultaneous equations approach," The Quarterly Review of Economics and Finance, Elsevier, vol. 52(3), pages 286-297.
    16. Patrick McGuire, 2009. "Bank ties and firm performance in Japan: some evidence since FY2002," BIS Working Papers 272, Bank for International Settlements.
    17. Jiang, Li & Kim, Jeong-Bon, 2000. "Cross-Corporate ownership, information asymmetry and the usefulness of accounting performance measures in Japan," The International Journal of Accounting, Elsevier, vol. 35(1), pages 85-98, March.
    18. Yishay Yafeh, 2003. "An International Perspective of Corporate Groups and Their Prospects," NBER Chapters, in: Structural Impediments to Growth in Japan, pages 259-284, National Bureau of Economic Research, Inc.
    19. Racic, Stanko, 2010. "Is Japanese management superior? Evidence from the performance of the USA targets in partial acquisitions," Journal of Multinational Financial Management, Elsevier, vol. 20(1), pages 14-34, February.
    20. Ahn, Hee-Joon & Cai, Jun & Hamao, Yasushi & Ho, Richard Y.K., 2005. "Adverse selection, brokerage coverage, and trading activity on the Tokyo Stock Exchange," Journal of Banking & Finance, Elsevier, vol. 29(6), pages 1483-1508, June.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:tky:fseres:2001cf109. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://edirc.repec.org/data/ritokjp.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CIRJE administrative office (email available below). General contact details of provider: https://edirc.repec.org/data/ritokjp.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.