Kimie Harada

Ownership concentration and dividend policy in Japan

Purpose - The purpose of this paper is to test two agency-based hypotheses regarding the effect of ownership concentration on dividend policy using a large sample of Japanese firms. Design/methodology/approach - Level regressions associating payout rates to ownership concentration are run. Different measures of payout are used to ensure the robustness of our findings. Endogeneity of ownership is taken into account. The choice of instruments is carefuly motivated and their statistical power and exogeneity are checked. How ownership concentration affects the propensity to increase dividends following changes in variables correlated with free cash flows is also examined. Findings - The results are consistent with rent extraction by large shareholders. Ownership concentration is associated with significantly lower dividends in proportion to earnings as well as relative to book equity. An endogenous relation between ownership concentration and dividend payout is established, but the results are not statistically different. Firms with concentrated ownership are also less likely to increase dividends when earnings increase or when debt decreases. Practical implications - Large shareholders do not appear to use dividend policy to remove excess cash and impose greater financial discipline on managers. Instead, the results underline the conflicts of interest between majority and minority shareholders. Originality/value - The endogeneity of ownership is controlled for using firm age and the industrys average ownership concentration as instruments. The effect of ownership concentration on dividend changes following changes in proxies for free cash flows is also analyzed.

Japan’s financial regulatory responses to the global financial crisis

Purpose - – This paper aims to understand Japan’s financial regulatory responses after the global financial crisis and recession. Japan’s post-crisis reactions show two seemingly opposing trends: collaboration with international organizations to strengthen the regulation to maintain financial stability, and regulatory forbearance for the banks with troubled small and medium enterprise [SME] borrowers. The paper evaluates the responses by the Japanese financial regulators in five areas (Basel III, stress tests, over-the-counter [OTC] derivatives regulation, recovery and resolution planning and banking policy for SME lending) and concludes that the effectiveness of the new regulations for financial stability critically depends on the willingness of the regulators to use the new tools. Design/methodology/approach - – This report evaluates the post-crisis responses by the Japanese financial authorities in five dimensions (Basel III, stress tests, OTC derivatives regulations, recovery and resolution planning and bank supervision). Findings - – The effectiveness of the new regulations for financial stability critically depends on the willingness of the regulators to use the new tools. Originality/value - – The paper is the first attempt to evaluate the financial regulatory trends in Japan after the global financial crisis.