Corporate Groups, Capital Investments and Stock Returns in Japan
University of Texas at Austin Working Paper
26 Pages Posted: 9 Jun 2003
Date Written: December 18, 2002
Abstract
This paper presents evidence that suggests that in Japan, corporate ownership structure affects the relation between capital investment expenditures and firm performance. Specifically, there is a negative relation between capital expenditures and subsequent risk-adjusted returns amongst keiretsu firms, which have a strong banking relationship, but a positive relation amongst independent firms. There is no relation between these returns and financial constraints for keiretsu firms. However, the positive relation between capital investments and stock returns for independent firms is strongest for those firms that have the lowest cash flows, and are thus likely to be the most financially constrained.
Keywords: Capital expenditures, Stock returns, Corporate groups, Financial constraints
JEL Classification: G30, G31, G32, G34
Suggested Citation: Suggested Citation
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