Yasuhiro Arikawa

Understanding the M&A Boom in Japan: What Drives Japanese M&A?

In this paper, we examine the causes of the first merger boom since the late 1990s in Japan. Using industry-level data, we show that mergers and acquisitions (M&As) are driven mainly by economic shocks. While industries with higher growth opportunities are likely to have more M&A activity, industries facing negative fundamental shocks, such as rapid sales declines, also experience larger M&A deals. These results suggest that the recent merger wave in Japan is mainly explained by the neoclassical model. At the firm level, we find that the bidder is the firm with the higher growth opportunity, and the target is the one with the lower growth opportunity. This means that Japanese firms improved their efficiency through merger activity since the 1990s. Lastly, we find that internal funds for the acquiring firm play a very important role in bidding activity, while a high probability of being targeted for M&A is associated with high leverage.

Corporate governance, relational banking and R&D: evidence from Japanese large firms in the 1980s and 1990s

We investigate the effects of the Japanese corporate governance structure on corporate investments, especially R&D, dividing Japanese high R&D firms into two groups, i.e. young growing firms and old mature firms. The main bank relationship mitigates the asymmetric information problem for young growing firms. R&D expenditure in the 1990s. Portfolio investors strengthen the cash constraints on R&D, while stable shareholders offset the myopic pressure by portfolio investors. We also show some evidence that stable shareholders induced old mature firms to overinvest during the bubble economy period.

In Search of Synergy Effects: Mergers and Productivity

We propose an alternative method for investigating whether firms improve performance through mergers after taking into account the selection bias of merging firms. We simultaneously consider the dynamics of firm performance and the merger decision by employing full information maximum likelihood (FIML) estimation. Our study differs from previous studies in that state dependence, unobservable heterogeneity, and selection bias are incorporated simultaneously. Because the effects of mergers may be felt gradually, the dynamic effects of mergers and the factors associated with these dynamics should be taken into account. Our FIML approach complements the strategy used in the extant literature for investigating the effects of mergers on firm performance.

Corporate Finance and its Impact on Corporate Strategy after the Bubble: Is the Long-term Strategy of Japanese Firms Really Changing?

Entering into the 1990s, the Japanese economy has suffered from a long recession. The GDP growth rate of the Japanese economy in the 1990s was quite low, and even fell into negative realms in 1997 and 1998 after the Asian economic crisis. The high investment ratio, which used to be a conspicuous feature of the Japanese economy, dramatically decreased since 1992. On the other hand, the institutional characteristics of the Japanese financial system have begun to change in the 1990s. The main-bank relationship has been weakening under the drastic change of corporate financial practices through the liberalization of the capital market. Intercorporate shareholding strategy has reportedly been revised due to the decade-long sluggish stock market after the collapse of the bubble economy in the mid-1990s, and according to NLI Research Institute (2000), the percentage of intercorporate shareholdings decreased from 21.5 per cent in 1987 to 10.9 per cent in 1999.