Japanese Firms Research Articles

Accounting Policy Changes and Firm Debts: Evidence ⁠from Japan

Using 86 accounting policy changes made by Nikkei-225 Japanese firms, this study examines the correlation between the probability of making accounting policy changes and debt. After controlling other motives for accounting policy changes, we find that a high amount of debt is negatively correlated with the probability of making accounting policy changes, which contradicts the debt-covenant hypothesis. This result suggests that Japanese firms with large amounts of debt do not need to make accounting policy changes to avoid debt-covenant violations because banks within their groups play significant roles in controlling and monitoring their operations. Our findings are consistent with the argument by Inoue and Thomas (1996) – factors that affect the choice of accounting policy in the US may not similarly affect the choice of accounting policy in Japan. We find that the current return on equity and prior year’s return on assets to be negative determinants of the accounting policy changes, and current return on assets and prior year’s change in return on equity are positive determinants. Finally, we find that firms that make accounting policy changes tend to be the ones receiving qualified audit opinions.

Perks or burdens? Being “nearly (Im)mobile” as IT foreign professionals during the COVID-19 pandemic in Japan

ABSTRACT This paper investigates how Vietnamese IT professionals managed their daily work and family lives in Japan during the COVID-19 pandemic. Adapting the concept of “nearly mobile”, this study suggests a concept of “nearly (im)mobile”, which focuses on the tensions and opportunities between mobility and immobility in skilled migrants’ work and family life. Workers from Vietnam comprise the third-largest group of foreign IT professionals in Japan. Many worked remotely during the pandemic, like others in the IT industry. However, amidst the unmitigated expansion of remote work during the pandemic including among Japanese nationals, how these workers experienced this work style has remained under-researched. The findings are based on semi-structured online and in-person interview data from Vietnamese IT professionals. Similar to Japanese national employees, many Vietnamese professionals could work remotely. Moreover, the workforce needs in the labour market allowed some to change jobs. However, junior workers were forced to be immobile (at the office) or stay in on-the-job training, and some skilled workers were expected to commit to longer hours for online communication with staff in Vietnam. Additionally, border restrictions exposed the immobility of foreign IT professionals and family members in Japan and Vietnam, which prevented these professionals from receiving childcare support from their families. This paper argues that while Vietnamese IT professionals could be physically “nearly (im)mobile” by staying at home to work, they were simultaneously pressured to undergo “nearly (im)mobile” work practices in Japanese firms while constrained by managing their work and family lives.

Do geographic distance, cultural distance, and political hazards equally matter for Japanese firms' outbound mergers and acquisitions? A firm‐ and deal‐level empirical analysis

Several studies on cultural clusters classify Japan as independent, meaning that wherever Japanese firms go abroad, they must adapt to very different environments. This study examines how Japanese firms treat deterrent effects of geographic distance, cultural distance, and political hazards and whether the deterrent effects may vary with firm size, firm age, and ownership solution. Results using data on Japanese firms' outbound mergers and acquisitions (M&A) from 2010 to 2019 reveal that (1) only the deterrent effect of geographic distance is absolute. (2) Larger firms with larger slack resources in their home country are less concerned about geographic distances and political hazards. (3) Older firms, exposed to typical practices and norms for a long time, are less adaptable to cultural distances. (4) The deterrent effect of geographic distance is weaker for complete control mode on the one hand, on the other hand, the moderating effect of complete control mode on political hazards hinges on firm size and age due to trade‐offs between integration benefits and resource/experience constraints.

The Effect of Cultural Norms on Group Decision-Making in Japanese Corporations

This paper explores the impact of cultural norms, particularly collectivism and social harmony, on group decision-making practices in Japanese corporations. Focusing on consensus-building mechanisms such as nemawashi and ringi-sho, the study examines how these practices foster inclusivity, mitigate conflict, and promote long-term organizational stability. It also highlights the challenges posed by slow decision-making processes and the risk of groupthink, which can stifle innovation and agility in a fast-paced global market. While consensus-building leads to more widely supported and risk-averse decisions, the paper suggests that balancing these traditional practices with more agile decision-making models is essential for Japanese corporations to remain competitive. The findings provide valuable insights into how Japanese firms might integrate global business practices while preserving their cultural identity.

CSR committees and their effect on green practices

This paper explores the relationship between the presence of corporate social responsibility (CSR) committees and the implementation of corporate green practices. Using data from 445 non-financial Japanese firms from 2010 to 2021, we find a positive impact of such sustainability committees on both integrated and three individual aspects of green initiatives, including internal pollution prevention, green supply chain management, and green product innovation. In addition, our evidence demonstrates a variation in the CSR committees—green practices nexus across diverse groups of firms, based on their exposures to environmental risks. Finally, we claim that CSR-linked compensation and CSR strategy can explain how CSR committees affect firms’ eco-friendly practices. Generally, our study confirms the crucial role of a governance mechanism—CSR committees—that business organisations and policymakers can exploit to promote sustainable behaviours.

The Penrose effect in the internationalization of professional service firms: an analysis of Japanese patent firms

The Penrose effect in the internationalization of professional service firms: an analysis of Japanese patent firms

The moderating effect of private information on the relation between financial reporting quality and corporate dividend efficiency

AbstractWe examine the effect of private information on the linkage between financial reporting quality and dividends. While prior studies show that better reporting quality mitigates agency problems regarding dividends, this effect can depend on capital suppliers' private information sources. In a sample of Japanese firms, we measure dividend efficiency regarding over‐ and underpayments and use unique main bank relationships as a proxy for private information. Reporting quality enhances dividend efficiency, and this linkage is observed only for firms without main bank relationships. The results suggest that high‐quality reporting streamlines dividends, particularly when capital suppliers do not have private information sources.

Drivers for Nominating First Women Executives: Empirical Evidence From Japanese Firms

Prior research on women in executive positions (WiE) has focused exclusively on the consequences of WiE by addressing how women executives influence firm strategy and performance, whereas little is known about the antecedents of WiE. However, to gain a comprehensive understanding of the overall impact of women executives on the firm, it is worthwhile to identify the triggers that prompt firms to appoint women executives for the first time. In this study, we have attempted to identify the antecedents of first appointments of women to executive teams (FAWE). On the basis of a theoretical frame incorporating the think crisis–think female perspective into the punctuated equilibrium model, we consider FAWE as the process of the transformational reform of an organization and examine the roles of three factors—firm performance (i.e., ROA and aspirational performance), environmental changes (i.e., industry dynamism, industry munificence, and industry complexity), and new CEO appointments—as antecedents of FAWE. We conducted a panel logistic regression analysis using 20 years of panel data (2000–2019) for Japanese listed firms. Our findings demonstrate that (1) poor firm performance (ROA and aspirational performance) was significantly related to the likelihood of FAWE in the subsequent year, and (2) a new CEO appointment was significantly related to the likelihood of FAWE in the subsequent year, whereas (3) hypotheses regarding environmental changes (industry dynamism, industry munificence, and industry complexity) were not confirmed. Implications for researchers and practitioners are discussed, along with the study’s limitations and suggestions for future research.

A Comparative Study on the Determinant Factors of Social Responsibility Performance in Individual Firms of Main Countries

ABSTRACT This paper analyses the relationship between ESG performance and its determinants from the data of 658 U.S. firms, 353 Japanese firms, 78 Chinese firms and 68 Korean firms, over the 2011 to 2021 period. An empirical analysis of this study's results is as follows. The policy factors are significantly positively related to the ESG in the firms that have shown a decrease in their grade and the firms with ESG performance grades that have increased. More specifically, firms also show a significant strong positive relationship between the specific fields within the ESG pillars and the policy dimension.

Executive compensation and worker wages during the global trade collapse: Evidence from Japanese firms

Widening income inequality is a serious social concern in many countries. We examine the causal effect of a negative demand shock on executive compensation and worker wages using a quasi-natural experiment, considering Japanese firms that experienced a sudden and substantial export decline following the global financial crisis in the late 2000s. Worker wages tended to decline significantly more relative to executive compensation after the crisis in firms depending more on exports, causing a wider pay differential. We establish the robustness of our difference-in-difference results by considering selection into exporters, excluding sporadic exporters, and controlling for foreign ownership or liquidity.

Exploration of hydrogen technology diffusion and network characteristics across multiple channels

This study investigates the diffusion and network structure of hydrogen technology from 1980 to 2022. Hydrogen fuel cell technology has the shortest diffusion cycle and high global acceptance. Production technology shows significant global demand, particularly within regional patent families. In contrast, hydrogen storage and fuel cell technologies have more concentrated diffusion, indicating higher adaptation thresholds. Japanese firms are crucial in spreading storage and production technologies, while U.S. enhances diffusion through licensing and transfer. Hydrogen refrigeration technology exhibits a more dispersed bidirectional network. Hydrogen production and fuel cell technologies demonstrate notable activity and network scale in the global market. This research provides valuable insights into the global development of hydrogen technology.

Board gender diversity and default risk in a bank-based financial system: A pre-registered report

This pre-registered report investigates the mitigating effect of board gender diversity on default risk in Japanese firms. We will also examine the potential mitigating effect of close bank-firm relationships on default risk. Importantly, we seek to determine whether women on boards (WOB) complements or substitutes bank monitoring in mitigating the default risk in the bank-based (financial) system. Our study will provide insight into the regulatory discussions concerning the Corporate Governance (CG) code, which seeks to enhance WOB and contribute to the debate on “who are the effective monitors in mitigating default risk” in a bank-based system.

Reinvigorating radioactive wastewater to the ocean: Investigate the effect of board diversity on environmental corporate social responsibility in the context of Japan

The discharge of radioactive wastewater into the eastern ocean from the Fukushima Daiichi nuclear plant, a decision that comes from the Japanese government and TEPCO (Tokyo Electric Power Company), has subjected Japanese firms to reputational damage risks and increasing environmental legitimacy pressure from multiple stakeholders in environmental corporate social performance (ECSR) than ever. In the present research endeavor, we draw upon the existing body of scholarly literature pertaining to gender-diverse board and business ethics as a critical element of steering ocean and coastal environmental management. This undertaking aims to provide original insights into the factors influencing board gender diversity (BGD) and its subsequent impact on ECSR within the specific context of Japan. Grounded in the theoretical framework of legitimacy theory, we put forth a conceptual model designed to elucidate the relationship between BGD and ECSR. Additionally, this study delves into the moderating influence of financial constraints between BGD and ECSR. To empirically examine our conceptual framework, we collected data from two primary sources: Toyo Keizai Inc. and Nikkei Inc. The findings of our investigation reveal a statistically significant positive relationship between BGD and ECSR performance. Furthermore, our results indicate that financial constraints serve to intensify the association between BGD and engagement in ECSR initiatives. Finally, we corroborate the robustness of our findings through various extensions of our analytical models.

Dualization of Intra-Firm Power Relations: Lifetime Employment and CEO Succession in Japanese Firms

Dualization of Intra-Firm Power Relations: Lifetime Employment and CEO Succession in Japanese Firms

Insider ownership and default risk: What does the data reveal about Japanese firms?

Insider ownership and default risk: What does the data reveal about Japanese firms?

An empirical study on sample size for the central limit theorem using Japanese firm data

AbstractIn statistics classes, the central limit theorem has been demonstrated using simulation‐based illustrations. Known population distributions such as a uniform or exponential distribution are often used to consider the behavior of the sample mean in simulated samples. Unlike such simulations, a number of real‐data‐based simulations are here implemented in which the populations are empirical distributions of data selected from Japanese firms. The dataset chosen contains 38 variables familiar to business students, such as sales and assets. The maximum population size of the variables is 2243. One thousand samples with replacement are selected for specific variable–sample size combinations. Hypothesis testing results indicate that the normality hypothesis for the sample mean is rejected for 31 variables at the 0.1% level even with a sample size of 500. It is emphasized that the data for these variables indicate that this should not be a surprise, and emphasize the importance of looking at data.

Artificial intelligent technologies in Japanese manufacturing firms: an empirical survey study

ABSTRACT Motivated by conflicting arguments/claims in the AI literature on its implementation, motivations, and practical impact, we combine interview data from a case company with questionnaire data from eighty-five Japanese manufacturing firms to examine seven AI technologies at firm, function, and technology levels. We find that one-third of the sample firms did not employ any of the seven AI technologies. Over 50% of the remaining firms implemented one or two technologies only. Visual recognition, machine learning and natural written language processing were the most commonly implemented technologies. AI implementation was the highest in production and research and development compared to other functions. The main motivations for implementing AI were to enhance operational efficiency, improve defects detection and prediction, automate processes, and reduce labour hours/costs. Among the firms that implemented AI, improvements in operational efficiency were more frequently reported, followed by reductions in labour hours/costs and enhancements in product/process quality. Lack of business needs, suitability to the business, expertise in implementation, and confidence in generating significant benefits were the main reasons for not experimenting with AI technologies. Our detailed analysis improves our understanding of the current state of AI adoption in manufacturing firms, its practical impact and highlights avenues for future research.

The decline of bank ownership and firm’s capital structure: evidence from Japanese business groups

ABSTRACT This paper examine how firms adjust their capital structure when their relationship with banks weaken. To this end, we use the data from Japan, a country that has experienced a sharp decline in the traditional bank-oriented business group system after its banking crisis in the late 1990s. We document the decline of financial leverage of Japanese firms after the crisis. The dynamic GMM model reveals that the decline is pronounced as the bank’s influence weakens firm’s financial leverage decreases. Finally, we show that as the bank relationship weakens, the speed of adjustment for target leverage fastens. These results indicate that the shift of bank-oriented to market-oriented economic system change the firm’s financial decision making.

Evaluating the impact of trade remedy measures on mature Japanese industries

Japan has recently initiated the implementation of trade remedy measures, although on a limited scale, with a primary focus on mature industries such as basic chemicals. This study analyzes the impact of these measures on beneficiary Japanese firms using an event study approach on stock prices. It aims to contribute to existing literature by providing a case analysis of Japanese trade remedy cases that have not been explored. It was found that beneficiary firms saw a statistically significant increase in market value following affirmative final determinations, particularly in expiry investigations. Further analysis revealed that the value increases were seen by firms that steadily conducted R&D activities and those that managed to maintain production without exiting or restructuring their operations. This suggests that trade remedy measures are not merely lifelines for mature and declining industries.

Spillover effects of Japanese firms and the role of absorptive capacity in Vietnam

The paper examines the role of the absorptive capacity of Vietnamese manufacturing firms in facilitating the link from Japanese spillovers to the productivity of local firms in the manufacturing sector. By using the Generalized Method of Moments (GMM) and threshold regression model with dynamic panel data from 2005 to 2018, the paper finds the following points. Firstly, the appearance and operation of Japanese firms can bring the positive horizontal labour effect and backward competition effect but it also brings the negative backward labour effect. Secondly, the absorptive capacity of domestic firms can help reduce the negative spillover effects and increase the positive spillover effects. Finally, if domestic firms cannot reach a threshold of absorptive capacity, they will suffer from Japanese spillovers while if they meet the threshold of absorptive capacity, they can enjoy the externalities from the operation and cooperation with Japanese firms.