The Cost of Capital in Japan: Recent Evidence and Further Results
44 Pages Posted: 16 Aug 2001 Last revised: 20 Mar 2021
Date Written: May 1990
We extend our recent work measuring the cost of capital in Japan and the United States by considering several questions that such results raised. Among our findings are:(1) The small firm - large firm distinction appears to be more significant in Japan, not in the United States;(2) Correcting Japanese accounting statements for cross-holding raises the estimated Japanese cost-of-capital by about 1 percentage point;(3) Correcting Japanese accounting statements for unmeasured returns to land has a significantly more important effect: the most conservative correction we attempt raises the implied Japanese return to capital to parity with the United States during the mid-1980's.
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