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Windfall Profits and Vertical Relationships: Who Gained in the Japanese Auto Industry from VERs?

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  • Ries, John C

Abstract

This paper employs an event study to analyze the effect of the 1981 voluntary export restraint agreements on profits in the Japanese automobile industry. Stock price movements of seven Japanese automakers and sixty-nine of their suppliers are examined. The results indicate that the profits of Japan's producers of passenger cars rose as a result of the voluntary export restraints, while only some suppliers, large ones and those producing specialized parts or services, appear to have shared the benefits. Voluntary export restraints increased profits for some firms in the Japanese auto industry but many suppliers did not share the windfall. Copyright 1993 by Blackwell Publishing Ltd.

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  • Ries, John C, 1993. "Windfall Profits and Vertical Relationships: Who Gained in the Japanese Auto Industry from VERs?," Journal of Industrial Economics, Wiley Blackwell, vol. 41(3), pages 259-276, September.
    • Handle: RePEc:bla:jindec:v:41:y:1993:i:3:p:259-76
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    Cited by:

    1. Bruce A. Blonigen & KaSaundra Tomlin & Wesley W. Wilson, 2019. "Tariff-Jumping FDI and Domestic Firms’ Profits," World Scientific Book Chapters, in: Foreign Direct Investment, chapter 14, pages 473-500, World Scientific Publishing Co. Pte. Ltd..
    2. Benjamin H. Liebman & Kasaundra M. Tomlin, 2008. "Safeguards and Retaliatory Threats," Journal of Law and Economics, University of Chicago Press, vol. 51(2), pages 351-376, May.
    3. Zijun Luo & Yonghong Zhou, 2016. "Gainers and Losers of Political Instability: Evidence from the Anti-Japanese Demonstration in China," Working Papers 1608, Sam Houston State University, Department of Economics and International Business.
    4. Crowley, Meredith A. & Meng, Ning & Song, Huasheng, 2019. "Policy shocks and stock market returns: Evidence from Chinese solar panels," Journal of the Japanese and International Economies, Elsevier, vol. 51(C), pages 148-169.
    5. Qiu, Larry D. & Spencer, Barbara J., 2002. "Keiretsu and relationship-specific investment: implications for market-opening trade policy," Journal of International Economics, Elsevier, vol. 58(1), pages 49-79, October.
    6. Davies, Ronald B. & Studnicka, Zuzanna, 2018. "The heterogeneous impact of Brexit: Early indications from the FTSE," European Economic Review, Elsevier, vol. 110(C), pages 1-17.
    7. Rasyad A. Parinduri & Shandre M. Thangavelu, 2013. "Trade liberalization, free trade agreements, and the value of firms: Stock market evidence from Singapore," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 22(6), pages 924-941, September.
    8. Zijun Luo & Yonghong Zhou, 2020. "Decomposing the effects of consumer boycotts: evidence from the anti-Japanese demonstration in China," Empirical Economics, Springer, vol. 58(6), pages 2615-2634, June.
    9. Zhou, Dongsheng & Vertinsky, Ilan, 2002. "Can protectionist trade measures make a country better off? A study of VERs and minimum quality standards," Journal of Business Research, Elsevier, vol. 55(3), pages 227-236, March.
    10. Greaney, Theresa M., 1996. "Import now! An analysis of market-share voluntary import expansions (VIEs)," Journal of International Economics, Elsevier, vol. 40(1-2), pages 149-163, February.
    11. Tain-Jy Chen & Meng-chun Liu, 1995. "Bilateral Negotiations and Multilateral Trade: The Case of Taiwan-U.S. Trade Talks," NBER Working Papers 5324, National Bureau of Economic Research, Inc.
    12. Keith Head & Barbara J. Spencer, 2017. "Oligopoly in international trade: Rise, fall and resurgence," Canadian Journal of Economics, Canadian Economics Association, vol. 50(5), pages 1414-1444, December.
    13. Bown, Chad & Crowley, Meredith A., 2016. "The Empirical Landscape of Trade Policy," CEPR Discussion Papers 11216, C.E.P.R. Discussion Papers.
    14. Boardman, Anthony & Vertinsky, Ilan & Whistler, Diana, 1997. "Using information diffusion models to estimate the impacts of regulatory events on publicly traded firms," Journal of Public Economics, Elsevier, vol. 63(2), pages 283-300, January.
    15. Nisha Malhotra & Sumeet Gulati, 2010. "The Effects Of The 1996 U.S.‐Canada Softwood Lumber Agreement On The Industrial Users Of Lumber: An Event Study," Contemporary Economic Policy, Western Economic Association International, vol. 28(2), pages 275-287, April.
    16. Benjamin Liebman & Kasaundra Tomlin, 2015. "World Trade Organization sanctions, implementation, and retaliation," Empirical Economics, Springer, vol. 48(2), pages 715-745, March.
    17. Ronald B. Davies & Benjamin H. Liebman & Kasaundra Tomlin, 2015. "I've Been Everywhere (Except Mexico): Investor Responses to NAFTA's Cross-Border Trucking Provisions," The Institute for International Integration Studies Discussion Paper Series iiisdp467, IIIS.
    18. Tain-Jy Chen & Meng-Chun Liu, 1997. "Bilateral Negotiations and Multilateral Trade: The Case of Taiwan - U.S. Trade Talks," NBER Chapters, in: Regionalism versus Multilateral Trade Arrangements, pages 345-370, National Bureau of Economic Research, Inc.

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