Asset Prices, Corporate Actions, and Bank of Japan Equity Purchases

57 Pages Posted: 27 Jan 2019 Last revised: 11 Aug 2019

See all articles by Ben Charoenwong

Ben Charoenwong

National University of Singapore - Department of Finance

Randall Morck

University of Alberta - Department of Finance and Statistical Analysis; National Bureau of Economic Research (NBER); European Corporate Governence Institute; Asian Bureau of Finance and Economic Research

Yupana Wiwattanakantang

National University of Singapore - Department of Finance

Multiple version iconThere are 2 versions of this paper

Date Written: August 8, 2019

Abstract

Since 2010, the Bank of Japan (BOJ) has purchased stocks to boost domestic firms’ valuations to increase GDP growth. The stock return elasticity with respect to BOJ purchases relative to the previous month’s market capitalization is around 1.6 on the day of the purchase and decreases across longer horizons. Over a quarter, BOJ share purchases worth 1% of total assets correspond to an increase of 1% in returns and a 0.27% increase in total assets. BOJ share purchases predict equity issuances but not debt issuances. However, this largely reflects increased cash and short- term investments. This unconventional monetary stimulus thus may boost share prices and encourages equity issuances, but is ultimately not well transmitted into real tangible capital investment.

Keywords: Unconventional Monetary Policy, Quantitative Easing, Corporate Investment, Japan

JEL Classification: E52, E58, G31, G32

Suggested Citation

Charoenwong, Ben and Morck, Randall K. and Wiwattanakantang, Yupana, Asset Prices, Corporate Actions, and Bank of Japan Equity Purchases (August 8, 2019). University of Alberta School of Business Research Paper No. 2019-501. Available at SSRN: https://ssrn.com/abstract=3310561 or http://dx.doi.org/10.2139/ssrn.3310561

Ben Charoenwong (Contact Author)

National University of Singapore - Department of Finance ( email )

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HOME PAGE: http://bizfaculty.nus.edu/faculty-profiles/519-ben

Randall K. Morck

University of Alberta - Department of Finance and Statistical Analysis ( email )

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National Bureau of Economic Research (NBER)

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Yupana Wiwattanakantang

National University of Singapore - Department of Finance ( email )

Business School
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Singapore, 117592
Singapore
65-6516-1912 (Phone)

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