This paper examines whether changes in corporate governance structure affect risk-taking activities in Japanese firms. New corporate governance systems have been imported into Japanese firms from the US since the late 1990s. However, Japanese firms have not necessarily been able to improve their financial performance. We analyze the effects of reforms of boards of directors on risk-taking activities because Japanese firms are too risk averse and this may lead to lower firm performance. Firstly, we analyze whether outside directors and nonexecutive directors affect risk-taking activities in Japanese firms. The results show that firms with more outside or non-executive directors promote risk-taking activities more aggressively. Secondly, we examine the differences in the effects on risk-taking activities between firms with outside directors and those with more than one outside director. The result shows that firms with more than one outside director invest in long-term capital more actively, while those with one outside director invest in more passively. Thirdly, we focus on two situations in which firms need to undertake riskier projects. The first is firms with business opportunities and the second is older firms. The result shows that firms with higher potential for growth and more than one outside director promote risk-taking activities, but that firms with higher potential for growth and only one outside director do not. Then, focusing on firm age, the result shows that older firms with one outside director undertake relatively less risky activities. Finally, we calculate the trends of sales and operating income after investment. The results show that firms with more than one outside director have a higher sales growth ratio than those with no outside directors or only one outside director. The facts suggest that risk-taking activities have economic effects on firms.
{"title":"HOW DOES CORPORATE GOVERNANCE STRUCTURE AFFECT RISK-TAKING ACTIVITIES IN JAPANESE FIRMS?","authors":"Tetsuyuki Kagaya, Toshihito Jinnai","doi":"10.15057/28215","DOIUrl":"https://doi.org/10.15057/28215","url":null,"abstract":"This paper examines whether changes in corporate governance structure affect risk-taking activities in Japanese firms. New corporate governance systems have been imported into Japanese firms from the US since the late 1990s. However, Japanese firms have not necessarily been able to improve their financial performance. We analyze the effects of reforms of boards of directors on risk-taking activities because Japanese firms are too risk averse and this may lead to lower firm performance. Firstly, we analyze whether outside directors and nonexecutive directors affect risk-taking activities in Japanese firms. The results show that firms with more outside or non-executive directors promote risk-taking activities more aggressively. Secondly, we examine the differences in the effects on risk-taking activities between firms with outside directors and those with more than one outside director. The result shows that firms with more than one outside director invest in long-term capital more actively, while those with one outside director invest in more passively. Thirdly, we focus on two situations in which firms need to undertake riskier projects. The first is firms with business opportunities and the second is older firms. The result shows that firms with higher potential for growth and more than one outside director promote risk-taking activities, but that firms with higher potential for growth and only one outside director do not. Then, focusing on firm age, the result shows that older firms with one outside director undertake relatively less risky activities. Finally, we calculate the trends of sales and operating income after investment. The results show that firms with more than one outside director have a higher sales growth ratio than those with no outside directors or only one outside director. The facts suggest that risk-taking activities have economic effects on firms.","PeriodicalId":154016,"journal":{"name":"Hitotsubashi journal of commerce and management","volume":"98 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2016-10-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127237399","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Accounting research has focused extensively on both discretionary accrual-based earnings management (DA) and real earnings management (REM). The third route of earnings management, classification shifting (CS), is a relatively new research area. First, this paper provides evidence that managers in Japan overstate operating income through classification shifting. Second, we find that analysts' forecast accuracy for operating income is reduced for firms that use frequent classification shifting to manipulate operating income upward. This paper can be helpful for regulatory agencies responsible for financial reporting quality when supervising or auditing the quality of firm's financial reporting. This paper also highlights investors' need to perform detailed reviews of firms' financial statements in their decision making.
{"title":"THE EFFECT OF CLASSIFICATION SHIFTING ON ANALYST FORECAST ACCURACY: EVIDENCE FROM JAPAN","authors":"Soo-Joon Chae, M. Nakano","doi":"10.15057/27537","DOIUrl":"https://doi.org/10.15057/27537","url":null,"abstract":"Accounting research has focused extensively on both discretionary accrual-based earnings management (DA) and real earnings management (REM). The third route of earnings management, classification shifting (CS), is a relatively new research area. First, this paper provides evidence that managers in Japan overstate operating income through classification shifting. Second, we find that analysts' forecast accuracy for operating income is reduced for firms that use frequent classification shifting to manipulate operating income upward. This paper can be helpful for regulatory agencies responsible for financial reporting quality when supervising or auditing the quality of firm's financial reporting. This paper also highlights investors' need to perform detailed reviews of firms' financial statements in their decision making.","PeriodicalId":154016,"journal":{"name":"Hitotsubashi journal of commerce and management","volume":"23 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2015-10-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127313094","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper investigates why some firms make more effort to innovate than others. Building onideas articulated by Edith Pen rose in The Theory of the Growth of the Firm (2009), I develop a theoretical framework articulating how the intensity with which firms engage in innovation development to heterogeneity in levels of human and physical resource that motivate such activities. The distinction between these forms of absorbed slack and unabsorbed slack, allows us to integrate a Penrosian logic on innovation-motivating forms of slack with a logic on slack-enabled innovation articulated in the behavioral theory of the firm research tradition (Cyert & March, 1992). Empirical tests examining the R&D intensity of 2, 231 US manufacturing firms between 2000 and 2014 provide support for the arguments. Greater levels of human and physical resource slack are associated with increased firm innovation effort. These effects are magnified when firms simultaneously possess more extensive unabsorbed financial slack.
{"title":"MOTIVATING AND ENABLING FIRM INNOVATION EFFORT: INTEGRATING PENROSIAN AND BEHAVIORAL THEORY PERSPECTIVES ON SLACK RESOURCES","authors":"Joel Malen","doi":"10.15057/27535","DOIUrl":"https://doi.org/10.15057/27535","url":null,"abstract":"This paper investigates why some firms make more effort to innovate than others. Building onideas articulated by Edith Pen rose in The Theory of the Growth of the Firm (2009), I develop a theoretical framework articulating how the intensity with which firms engage in innovation development to heterogeneity in levels of human and physical resource that motivate such activities. The distinction between these forms of absorbed slack and unabsorbed slack, allows us to integrate a Penrosian logic on innovation-motivating forms of slack with a logic on slack-enabled innovation articulated in the behavioral theory of the firm research tradition (Cyert & March, 1992). Empirical tests examining the R&D intensity of 2, 231 US manufacturing firms between 2000 and 2014 provide support for the arguments. Greater levels of human and physical resource slack are associated with increased firm innovation effort. These effects are magnified when firms simultaneously possess more extensive unabsorbed financial slack.","PeriodicalId":154016,"journal":{"name":"Hitotsubashi journal of commerce and management","volume":"49 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2015-10-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129265891","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"PACE CLASSES: NEEDS ASSESSMENT, SYLLABUS DESIGN AND MATERIALS SELECTION","authors":"James R. Hunt","doi":"10.15057/27536","DOIUrl":"https://doi.org/10.15057/27536","url":null,"abstract":"","PeriodicalId":154016,"journal":{"name":"Hitotsubashi journal of commerce and management","volume":"15 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2015-10-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126993584","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"INDUSTRY-UNIVERSITY-GOVERNMENT COLLABORATION AND THE DEVELOPMENT OF HIGH-TECH INDUSTRIES IN CHINA: THE CASES OF FOUNDER AND NEUSOFT","authors":"Hua Jin","doi":"10.15057/26975","DOIUrl":"https://doi.org/10.15057/26975","url":null,"abstract":"","PeriodicalId":154016,"journal":{"name":"Hitotsubashi journal of commerce and management","volume":"84 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2014-10-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116030482","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In order to improve the country's monopolistic environment, the Japanese government took several deregulation measures during the last decade. However, industrial monopolies remain regionally; some new mechanism has therefore become necessary to induce the regional monopoly firms improve the situation. In this paper, we focus on two mechanisms, “yardstick competition” and “franchise bidding,” which are often used to control the monopolistic behavior of firms, and compare the functionalities of the mechanisms based on asymmetric information. We conclude that franchise bidding is more desirable than yardstick competition in controlling the monopoly behavior of firms in the Japanese regional public utility industries.
{"title":"YARDSTICK COMPETITION AND FRANCHISE BIDDING: A COMPARATIVE ANALYSIS BASED ON ASYMMETRIC INFORMATION","authors":"Shumpei Harada, H. Yamauchi","doi":"10.15057/26976","DOIUrl":"https://doi.org/10.15057/26976","url":null,"abstract":"In order to improve the country's monopolistic environment, the Japanese government took several deregulation measures during the last decade. However, industrial monopolies remain regionally; some new mechanism has therefore become necessary to induce the regional monopoly firms improve the situation. In this paper, we focus on two mechanisms, “yardstick competition” and “franchise bidding,” which are often used to control the monopolistic behavior of firms, and compare the functionalities of the mechanisms based on asymmetric information. We conclude that franchise bidding is more desirable than yardstick competition in controlling the monopoly behavior of firms in the Japanese regional public utility industries.","PeriodicalId":154016,"journal":{"name":"Hitotsubashi journal of commerce and management","volume":"22 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2014-10-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"133231076","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper investigates how and why various central ministries in Japan have adopted policies promoting Japanese popular culture such as manga (comic books), anime (animated films and TV shows), games, fashion and so forth, which had formerly been neglected by the state due to their stigmatized status. This paper analyzes documents released by bureaucrats and the results of interviews conducted with key persons from central ministries and institutions under their jurisdiction to shed light on institutional isomorphism observed in the central government of Japan.
{"title":"NATION BRANDING THROUGH STIGMATIZED POPULAR CULTURE: THE \"COOL JAPAN\" CRAZE AMONG CENTRAL MINISTRIES IN JAPAN","authors":"Takeshi Matsui","doi":"10.15057/26980","DOIUrl":"https://doi.org/10.15057/26980","url":null,"abstract":"This paper investigates how and why various central ministries in Japan have adopted policies promoting Japanese popular culture such as manga (comic books), anime (animated films and TV shows), games, fashion and so forth, which had formerly been neglected by the state due to their stigmatized status. This paper analyzes documents released by bureaucrats and the results of interviews conducted with key persons from central ministries and institutions under their jurisdiction to shed light on institutional isomorphism observed in the central government of Japan.","PeriodicalId":154016,"journal":{"name":"Hitotsubashi journal of commerce and management","volume":"12 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2014-10-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127832089","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The purpose of this study is to identify and explain the differences in the characteristics of earnings management around the world through an examination of quarterly earnings. First, we identify an earnings target in each country. We find that corporations in Finland, Germany, Italy, and Japan tend to avoid making losses and those in Israel and the U.S. tend to avoid earnings decrease. Second, we measure the extent of earnings management in each country. Our findings show that corporations in Japan, Germany, and Israel tend to manage earnings to achieve an earnings target, meanwhile those in Finland, Singapore, and the U.S. don't tend to manage earnings relatively. Third, we examine the dividend and investment policies. Corporations in Japan and Finland are dividend focused, meanwhile those in Israel and the U.S. are investment focused. Fourth, we calculate an institutional factor to identify the reasons for earnings targets, procedures, and dividend and investment behavior. Our results show that earnings targets, procedures, and dividend and investment behavior are closely related to the accountability for investment and the propensity to take risk in each country.
{"title":"QUARTERLY EARNINGS MANAGEMENT AROUND THE WORLD: LOSS AVOIDANCE OR EARNINGS DECREASE AVOIDANCE?","authors":"Keishi Fujiyama, Tetsuyuki Kagaya, Tomohiro Suzuki, Yukari Takahashi","doi":"10.15057/26979","DOIUrl":"https://doi.org/10.15057/26979","url":null,"abstract":"The purpose of this study is to identify and explain the differences in the characteristics of earnings management around the world through an examination of quarterly earnings. First, we identify an earnings target in each country. We find that corporations in Finland, Germany, Italy, and Japan tend to avoid making losses and those in Israel and the U.S. tend to avoid earnings decrease. Second, we measure the extent of earnings management in each country. Our findings show that corporations in Japan, Germany, and Israel tend to manage earnings to achieve an earnings target, meanwhile those in Finland, Singapore, and the U.S. don't tend to manage earnings relatively. Third, we examine the dividend and investment policies. Corporations in Japan and Finland are dividend focused, meanwhile those in Israel and the U.S. are investment focused. Fourth, we calculate an institutional factor to identify the reasons for earnings targets, procedures, and dividend and investment behavior. Our results show that earnings targets, procedures, and dividend and investment behavior are closely related to the accountability for investment and the propensity to take risk in each country.","PeriodicalId":154016,"journal":{"name":"Hitotsubashi journal of commerce and management","volume":"33 10","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2014-10-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"120937029","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper provides empirical evidence consistent with the existence of adverse selection and moral hazard in the whole life and term life insurance market. We use life insurance companies' data to recognize adverse selection, moral hazard, and medical examination effects. Drawing on data from more than 1.3 million insurance policies in Japan, we find evidence that the mortality of the insured at policy inception is lower than that of the general public; with the selection of the insured via medical examination, we did not find adverse selection in new whole life and term life insurance risks. In the case of automatic renewal of term life policies where insurance companies set the price using the same regulated mortality table as that of optional renewal term life policies, the effectiveness of medical selection attenuates after approximately five years of the policy life, and the costs from adverse selection and the moral hazard from suicide begin to occur around the fifth year.
{"title":"ASYMMETRIC INFORMATION IN LIFE INSURANCE: DIFFERENCE BETWEEN WHOLE LIFE AND TERM LIFE","authors":"Shinichi Yamamoto, Takau Yoneyama, W. Kwon","doi":"10.15057/26978","DOIUrl":"https://doi.org/10.15057/26978","url":null,"abstract":"This paper provides empirical evidence consistent with the existence of adverse selection and moral hazard in the whole life and term life insurance market. We use life insurance companies' data to recognize adverse selection, moral hazard, and medical examination effects. Drawing on data from more than 1.3 million insurance policies in Japan, we find evidence that the mortality of the insured at policy inception is lower than that of the general public; with the selection of the insured via medical examination, we did not find adverse selection in new whole life and term life insurance risks. In the case of automatic renewal of term life policies where insurance companies set the price using the same regulated mortality table as that of optional renewal term life policies, the effectiveness of medical selection attenuates after approximately five years of the policy life, and the costs from adverse selection and the moral hazard from suicide begin to occur around the fifth year.","PeriodicalId":154016,"journal":{"name":"Hitotsubashi journal of commerce and management","volume":"28 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2014-10-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127763437","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The purpose of this paper is to make clear the historical significance of voluntary business activities to mitigate climate change. Roughly speaking, there are two main approaches: one based on regulations by the government of each country, and the other based on voluntary activities by the private sector. In Japan, we have been able to observe both approaches since the oil crises of the 1970s. The greatest issue in implementing global warming countermeasures is to avoid initiatives that may conflict with people's desire to attain affluence. Such initiatives create a “tradeoff” between affluence and global salvation. Unless this tradeoff mechanism is eliminated, global warming countermeasures cannot be expected to make any progress. Developing countries such as China and India did not participate in the framework for establishing country-specific greenhouse gas emission reduction targets under the Kyoto Protocol of 1997 because they feared that the establishment of such targets might interfere with efforts to realize affluence in their countries. The tradeoff between affluence and global salvation can only be resolved by promoting energy conservation. Energy consumption can be reduced considerably (and, in effect, achieve considerable reduction in greenhouse effect gas emissions) while maintaining and expanding affluence, if all countries/regions in the world achieve the same level of energy conservation as that in Japan. In this paper, we will make clear the historical reasons why and how Japan has been able to achieve such a high level of energy conservation.
{"title":"VOLUNTARY OR REGULATORY? COMPARATIVE BUSINESS ACTIVITIES TO MITIGATE CLIMATE CHANGE","authors":"T. Kikkawa, So Hirano, A. Itagaki, Izumi Okubo","doi":"10.15057/26974","DOIUrl":"https://doi.org/10.15057/26974","url":null,"abstract":"The purpose of this paper is to make clear the historical significance of voluntary business activities to mitigate climate change. Roughly speaking, there are two main approaches: one based on regulations by the government of each country, and the other based on voluntary activities by the private sector. In Japan, we have been able to observe both approaches since the oil crises of the 1970s. The greatest issue in implementing global warming countermeasures is to avoid initiatives that may conflict with people's desire to attain affluence. Such initiatives create a “tradeoff” between affluence and global salvation. Unless this tradeoff mechanism is eliminated, global warming countermeasures cannot be expected to make any progress. Developing countries such as China and India did not participate in the framework for establishing country-specific greenhouse gas emission reduction targets under the Kyoto Protocol of 1997 because they feared that the establishment of such targets might interfere with efforts to realize affluence in their countries. The tradeoff between affluence and global salvation can only be resolved by promoting energy conservation. Energy consumption can be reduced considerably (and, in effect, achieve considerable reduction in greenhouse effect gas emissions) while maintaining and expanding affluence, if all countries/regions in the world achieve the same level of energy conservation as that in Japan. In this paper, we will make clear the historical reasons why and how Japan has been able to achieve such a high level of energy conservation.","PeriodicalId":154016,"journal":{"name":"Hitotsubashi journal of commerce and management","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2014-10-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130636155","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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