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What Caused Fixed Investment To Stagnate During The 1990s In Japan? Evidence From Panel Data Of Listed Companies

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  • KEIICHI HORI
  • MAKOTO SAITO
  • KOICHI ANDO

Abstract

Taking into account considerable changes in the corporate finance behaviour of listed Japanese companies during the 1990s, this paper empirically investigates the causes of the stagnation of the listed companies’ fixed investment during the 1990s, using panel data from the companies’ financial statements. Our findings include the following: (i) while positive cash flow sensitivity was detected for the companies listed during the 1990s, it was not necessarily a consequence of the binding of liquidity constraints; (ii) declines in Tobin's q explain decreases in fixed investment throughout the 1990s; and (iii) the holding of liquid assets acted as a buffer against liquidity shocks.

Suggested Citation

  • Keiichi Hori & Makoto Saito & Koichi Ando, 2006. "What Caused Fixed Investment To Stagnate During The 1990s In Japan? Evidence From Panel Data Of Listed Companies," The Japanese Economic Review, Japanese Economic Association, vol. 57(2), pages 283-306, June.
    • Handle: RePEc:bla:jecrev:v:57:y:2006:i:2:p:283-306
    DOI: 10.1111/j.1468-5876.2006.00366.x
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    Cited by:

    1. KAWAKAMI Atsushi & ASABA Shigeru, 2014. "How Does the Market Value Organizational Management Practices of Japanese Firms? Using interview survey data," Discussion papers 14050, Research Institute of Economy, Trade and Industry (RIETI).
    2. Yasuyuki Sawada & Kazumitsu Nawata & Masako Ii & Mark J. Lee, 2011. "Did the Financial Crisis in Japan Affect Household Welfare Seriously?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43, pages 297-324, March.
    3. Hiroyuki Kasahara & Yasuyuki Sawada & Michio Suzuki, 2016. "Monetary Policy and Covered Interest Parity in the Post GFC Period: Evidence from the Australian Dollar and the NZ Dollar," CIRJE F-Series CIRJE-F-1033, CIRJE, Faculty of Economics, University of Tokyo.
    4. Kenn Ariga & Fumio Hayashi & Charles Horioka, 2006. "Introduction," The Japanese Economic Review, Japanese Economic Association, vol. 57(2), pages 157-160, June.
    5. Yasuyuki Sawada & Kazumitsu Nawata & Masako Ii & Jeong-Joon Lee, 2007. "Did the Credit Crunch in Japan Affect Household Welfare? An Augmented Euler Equation Approach Using Type 5 Tobit Model," CARF F-Series CARF-F-099, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
    6. Shigeru Asaba, 2013. "Patient investment of family firms in the Japanese electric machinery industry," Asia Pacific Journal of Management, Springer, vol. 30(3), pages 697-715, September.
    7. Sakai, Hirotsugu, 2020. "Did financing constraints cause investment stagnation in Japan after the 1990s?," Journal of Corporate Finance, Elsevier, vol. 64(C).
    8. Fujii, Takao & Hiraga, Kazuki & Kozuka, Masafumi, 2013. "Effects of public investment on sectoral private investment: A factor augmented VAR approach," Journal of the Japanese and International Economies, Elsevier, vol. 27(C), pages 35-47.
    9. Hiroki Arato & Katsunori Yamada, 2012. "Japan's Intangible Capital and Valuation of Corporations in a Neoclassical Framework," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 15(4), pages 459-478, October.
    10. Kasahara, Hiroyuki & Sawada, Yasuyuki & Suzuki, Michio, 2024. "The effect of bank recapitalization policy on credit allocation, investment, and productivity: Evidence from a banking crisis in Japan," Journal of Banking & Finance, Elsevier, vol. 158(C).
    11. Inoue, Hitoshi & Kani, Masayo & Nakashima, Kiyotaka, 2019. "The Dynamic Effect of Uncertainty on Corporate Investment through Internal and External Financing," MPRA Paper 98533, University Library of Munich, Germany.
    12. Hiroyuki Kasahara & Yasuyuki Sawada & Michio Suzuki, 2016. "The Effect of Bank Recapitalization Policy on Corporate Investment: Evidence from a Banking Crisis in Japan," CARF F-Series CARF-F-399, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
    13. Miyajima, Hideaki & Ogawa, Ryo & Saito, Takuji, 2018. "Changes in corporate governance and top executive turnover: The evidence from Japan," Journal of the Japanese and International Economies, Elsevier, vol. 47(C), pages 17-31.
    14. Saito, Takuji, 2008. "Family firms and firm performance: Evidence from Japan," Journal of the Japanese and International Economies, Elsevier, vol. 22(4), pages 620-646, December.
    15. Hideaki Miyajima & Ryo Ogawa & Takuji Saito, 2017. "Changes in Corporate Governance and Top Executive Turnover: The Evidence from Japan," NBER Working Papers 23812, National Bureau of Economic Research, Inc.
    16. Shin-ichi Fukuda & Munehisa Kasuya & Masayuki Keida, 2018. "Entrepreneurship and capital investment: another explanation for the slump in capital investment under deflation," Public Policy Review, Policy Research Institute, Ministry of Finance Japan, vol. 14(3), pages 489-510, July.
    17. Masaharu Hanazaki & Tetsuya Hada, 2018. "Analyzing Determinants of Corporate Investment Behavior: Progress in Investment Diversification and Roles of Internal Funds," Public Policy Review, Policy Research Institute, Ministry of Finance Japan, vol. 14(3), pages 433-460, July.
    18. ISHIKAWA Takayuki, 2023. "The Decline in Capital Formation in Japan: Empirical research on Japanese listed firms data," Discussion papers 23008, Research Institute of Economy, Trade and Industry (RIETI).
    19. HATTORI Masazumi & FUJITANI Ryosuke & NAKAJIMA Jouchi & YASUDA Yukihiro, 2023. "Real Effects of Corporate Cash Holdings: Evidence from Japan," Discussion papers 23084, Research Institute of Economy, Trade and Industry (RIETI).

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