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An Application of Self-Organizing Maps to Financial Structure Analysis of Keiretsu versus Non-Keiretsu Firms in Japan

Author

Listed:
  • John J. Cheh

    (George W. Daverio School of Accountancy, College of Business Administration, The University of Akron, Akron, OH 44325-4802, USA)

  • Evgeny A. Lapshin

    (TNK-BP, Business Unit Orenburg-Saratov Planning, Performance and Control Leader, 2 Magistralnaya St, Buzuluk, Orenburg Region 461040, Russian Federation)

  • Il-Woon Kim

    (George W. Daverio School of Accountancy, College of Business Administration, The University of Akron, Akron, OH 44325-4802, USA)

Abstract

It has been argued that keiretsu in Japan allows its member firms to maintain a financial structure different from that of non-keiretsu member firms. In this paper, we use two different types of financial statement ratio analysis techniques to discover whether Kohonen's self-organizing map (SOM) is able to uncover the differences in financial structures between keiretsu and non-keiretsu firms:ad hocfinancial ratios and valuation-based financial ratios. We have found some evidence that SOM enables both financial analysis techniques to recognize different financial structures between the two groups of the firms. Implications of this finding for investment decisions have been discussed.

Suggested Citation

  • John J. Cheh & Evgeny A. Lapshin & Il-Woon Kim, 2006. "An Application of Self-Organizing Maps to Financial Structure Analysis of Keiretsu versus Non-Keiretsu Firms in Japan," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 9(03), pages 405-429.
    • Handle: RePEc:wsi:rpbfmp:v:09:y:2006:i:03:n:s0219091506000781
    DOI: 10.1142/S0219091506000781
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    Keywords

    Financial structure analysis; keiretsu versus non-keiretsu firms; Kohonen's self-organizing map;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services
    • G3 - Financial Economics - - Corporate Finance and Governance

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