Financial and product market integration: Responses of Japanese firms

Abstract

Abstract and Key Results ▪ Growing financial and product market integration has resulted in increased pressures for changes in most developed economies. We investigate the impact of these twin drivers on changes effected by Japanese firms between 1986 and 1999. ▪ Specifically, we examine (1) how shareholdings by market investors and foreign investors and (2) export ratio impact outcomes in the form of efficiency increases, dividend payout, and leverage change. ▪ We also investigate whether the relationships differ between keiretsu and nonkeiretsu firms. ▪ Ownership by market investors was positively associated with efficiency increases and decreases in firm leverage. In addition, firm export ratio played a key role in motivating Japanese firms to increase their efficiency and firm leverage. Moreover, these relationships were more pronounced in non-keiretsu than keiretsu firms.