Strategic investments in Japanese corporations: do foreign portfolio owners foster underinvestment or appropriate investment? (original) (raw)

Ownership Structure, Investment Behavior and Firm Performance in Japanese Manufacturing Industries

2001

Using data spanning the 1996-1998 fiscal years of 247 of Japan's largest manufacturers, we empirically evaluate the extent to which a firm's investment behavior and financial performance is influenced by its ownership structure. To do so, we examine six distinct categories of Japanese shareholders: foreign investors, investment funds, pen sion funds, banks and insurance companies, affiliated companies and insiders. Our

Ownership structure, investment behaviour and firm performance in Japanese manufacturing industries

2005

Using data spanning the 1996-1998 fiscal years of 247 of Japan's largest manufacturers, we empirically evaluate the extent to which a firm's investment behavior and financial performance is influenced by its ownership structure. To do so, we examine six distinct categories of Japanese shareholders: foreign investors, investment funds, pension funds, banks and insurance companies, affiliated companies and insiders. Our findings strongly indicate that the relationship between the equity stakes of a particular category of investor and a firm's financial performance and investment behavior is highly idiosyncratic. Such a result emphasizes the importance of making finely grained and contextually relevant distinctions when modeling and evaluating corporate governance relations.

Shareholder Heterogeneity and Conflicting Goals: Strategic Investments in the Japanese Electronics Industry

Journal of Management Studies, 2011

This article investigates the effects of the changing institutional environment on strategic orientations of Japanese electronics firms during the 1990s. We examine the effects of three different types of shareholders on strategic directions of their invested firms. The first one, foreign portfolio investors, characterizes the emerging influence that pressed for change in corporate strategies. The two domestic shareholders, corporate investors and financial institutions, represent the conventional forces for continuity. Between the two domestic forces, though, while corporate investors attempted to maintain status quo, financial institutions have shifted toward market-oriented behavior of investment. Specifically, we explore (1) the influence of each type of shareholders on a firm's diversification strategy and capital commitment; and (2) the moderating effects of firm performance on the relationships between ownership structure and strategic choices. The results suggest that foreign investors prefer the focused product portfolio and conservative capital commitment. They also prefer the reduction of capital investment when the financial performance of their invested firms is poor. Domestic financial institutions are now similarly sensitive to the performance of their invested firms when those firms make strategic investments. By contrast, domestic corporate shareholders remain indifferent to performance, while they aim to maintain relational business ties with invested firms.

Japanese firms' investment strategies in emerging economies

2000

Abstract: This study jointly examines the effects of organizational capabilities and public and private expropriation hazards on the level of equity ownership chosen for foreign subsidiaries in emerging markets. Specifically, we explore the mechanisms by which 660 Japanese multinational corporations draw upon industry-specific, country-specific and total international experience to mitigate these hazards in FDI for their 1,727 subsidiaries in 18 emerging markets.

The impact of foreign investors on the risk-taking of Japanese firms

Journal of the Japanese and International Economies, 2012

Consistent with a bank-centered governance system, Japanese firms exhibit an exceptionally low level of performance variability. The increased involvement of foreign investors motivated by shareholder value is thus likely to have triggered a major shift in their risk-taking behavior. My results confirm this assumption as all standard measures of performance volatility appear to have significantly increased with the level of foreign ownership. Controlling for endogeneity provides higher point estimates supporting anecdotal evidence that foreign investors have targeted firms taking unusually low risk. Overall, the evidence highlights the considerable impact that this category of investors can have on a firm's decisions and, by consequence, on its performance.

Does Ownership Really Matter? : The Role of Foreign Investors in Corporate Governance in Japan

Asia Review

After the banking crisis of 1997, corporate ownership in Japan shifted from an insider-dominated to an outsider-dominated structure. This paper analyzes the impact of dramatic changes in the ownership structure on corporate governance and firm value, focusing on the role of foreign institutional investors. There are two competing views on the role of increased foreign ownership. The positive view is that foreign investors have high monitoring capability, and encourage improvements in the governance arrangement of firms, resulting in higher performance. Conversely, the negative view is that they have strong bias in their investment strategies, and are less committed to a particular firm. Even though a correlation between foreign ownership and high performance has been observed, it may be a superficial one. Higher stock returns can be induced by the demand for a stock, while performance can simply reflect a foreign investor's preference for a high quality firm. To determine which view is more compelling, we constructed a unique long-term data set, and examined the determinants of foreign ownership and its impact on stock returns as well as performance. We found that the investment behavior of foreign investors is characterized by a particular bias, and takes into account governance arrangements. Second, their investment substantially affects the stock return of firms. Third, even after controlling for reverse causality, however, their growing presence positively affects firm performance, suggesting that foreign institutional investors play a disciplinary role once their shareholding increases.

Foreign-owned versus Domestically-owned Firms: Economic Performance in Japan

Review of Development Economics, 2007

This paper utilizes micro-panel data for firms located in Japan and examines differences in corporate performance between foreign-owned and domestically-owned firms in the 1990s. We find that foreign-owned firms not only reflect superior static characteristics, but also achieve faster growth. Moreover, foreign investors appear to invest in firms that may not be immediately profitable, but those that are potentially the most profitable in the future. There is also no evidence that foreign investor is "foot-loose." These imply that foreign investors bring useful firm-specific assets into the Japanese market, which may work as an effective catalyst for necessary structural reform.

Foreign and domestic ownership as the mediator Between investment strategy and company performance

Journal of Management and Business

The study aims to examine the moderating effect of the ownership structure on the relationship between investment strategy and the comprehensive firm performance in ASEAN. Using data from financial reports and sustainability reports, the samples are 34 nonfinancial companies in ASEAN 2007 until 2019. The sample testing method is unbalanced panel data regression to test hypothesis. The results show foreign and domestic ownership moderate the relationship between investment strategy and productivity and financial performance. This research also proves that foreign and domestic ownership cannot form the relationship between investment strategy and environmental performance. This study gives additional evidence as confirmation of the theory of Industrial Organization about the implementation of the corporate strategy is influenced by external factors, namely the role of foreign ownership in improving corporate performance. This study gives new insight to the company about the importance of considering the investment strategy based on R&D and the role of foreign and domestic ownership to increase productivity, financial performance and environmental performance.

Japanese MNCs Investment Objectives and Subsidiary Performance

International Journal of Business and Management, 2012

This study explores the Japanese MNCs investment objectives and their subsidiary's performance in host-county. We found five main investment objectives by Japanese MNCs generally for establishing overseas or product network followed by obtain the local market, establish overseas distribution, information gathering and cheap labor cost. China in East Asia region indicates the highest number of Japanese MNCs outward FDI followed by Southeast Asia region (Singapore, Thailand, and Malaysia) in year 2003 and 2009. The high number of Japanese MNCs in Asia may be influence by bilateral and regional approaches to take advantage of Free Trade Agreement (FTA). Our empirical results also shows that Japanese investment in Asia region more prefer to choose 'obtain local market' in the early stage of entering to host country and revise to new investment objective after certain period of time to remain the firm's profitability.