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Japanese horizontal keiretsu and the performance implications of membership

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  • Takehiko Isobe
  • Shige Makino
  • Anthony Goerzen

Abstract

Our study investigates the effect of Japanese horizontal keiretsu group membership on firm risk and return. Like prior studies, our results show that horizontal keiretsu membership has a negative effect on firm profitability. However, we find that horizontal keiretsu networks are likely to increase the gap between targeted and realized returns, which we call the outcome-aspiration gap. Moreover, in contrast to prior studies, our results indicate that keiretsu membership does not enable member firms to reduce risks by smoothing profitability. Instead, our findings provide evidence that is counter to the conventional notion that Japanese horizontal keiretsu allow their member firms to trade off profits for reduced risk.
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  • Takehiko Isobe & Shige Makino & Anthony Goerzen, 2006. "Japanese horizontal keiretsu and the performance implications of membership," Asia Pacific Journal of Management, Springer, vol. 23(4), pages 453-466, December.
    • Handle: RePEc:kap:asiapa:v:23:y:2006:i:4:p:453-466
    DOI: 10.1007/s10490-006-9015-2
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    3. Sea-Jin Chang, 2006. "Business groups in East Asia: Post-crisis restructuring and new growth," Asia Pacific Journal of Management, Springer, vol. 23(4), pages 407-417, December.
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    6. Toru Yoshikawa & Jean McGuire, 2008. "Change and continuity in Japanese corporate governance," Asia Pacific Journal of Management, Springer, vol. 25(1), pages 5-24, January.
    7. Pawan Budhwar & Yaw Debrah, 2009. "Future research on human resource management systems in Asia," Asia Pacific Journal of Management, Springer, vol. 26(2), pages 197-218, June.
    8. Yina Mao & Kelly Peng & Chi-Sum Wong, 2012. "Indigenous research on Asia: In search of the emic components of guanxi," Asia Pacific Journal of Management, Springer, vol. 29(4), pages 1143-1168, December.
    9. Tomeczek, Artur F., 2022. "The evolution of Japanese keiretsu networks: A review and text network analysis of their perceptions in economics," Japan and the World Economy, Elsevier, vol. 62(C).
    10. Michael N. Young & Mike W. Peng & David Ahlstrom & Garry D. Bruton & Yi Jiang, 2008. "Corporate Governance in Emerging Economies: A Review of the Principal–Principal Perspective," Journal of Management Studies, Wiley Blackwell, vol. 45(1), pages 196-220, January.
    11. Lee, Keonbeom & Peng, Mike W. & Lee, Keun, 2008. "From diversification premium to diversification discount during institutional transitions," Journal of World Business, Elsevier, vol. 43(1), pages 47-65, January.
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    13. Jean McGuire & Sandra Dow, 2009. "Japanese keiretsu: Past, present, future," Asia Pacific Journal of Management, Springer, vol. 26(2), pages 333-351, June.
    14. Marie-Ann Betschinger, 2015. "Do banks matter for the risk of a firm's investment portfolio? Evidence from foreign direct investment programs," Strategic Management Journal, Wiley Blackwell, vol. 36(8), pages 1264-1276, August.

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