Does Stock Market Listing Impact Investment in Japan? / Joseph J. French, Ryosuke Fujitani, Yukihiro Yasuda.

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French, Joseph J

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w26495.Publication details: Cambridge, Mass. National Bureau of Economic Research 2019.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: We provide the first large sample comparison of investment by Japanese listed and unlisted public firms. We show that listed firms invest more and have greater sensitivity to investment opportunities than comparable unlisted companies. Our findings suggest that the role of listing in alleviating financial constraints is more important than potential underinvestment due to myopic behavior. However, the positive relationship between listing and investment is primarily driven by standalone firms. Further analysis confirms that as the number of subsidiaries in a business group increases the positive impact of listing on investment declines. Additionally, when a firm faces financial constraints listing more positively impacts investment. We also document a positive association between stock liquidity and investment for listed firms. Taken together, our results suggest that stock markets play an important role in easing financial constraints and preventing managerial shirking both of which increase investment. Finally, we show that higher levels of owner-ship by financial institutions, board members, and foreign investors increases corporate investment.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w26495 (Browse shelf(Opens below))	Not For Loan

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November 2019.

We provide the first large sample comparison of investment by Japanese listed and unlisted public firms. We show that listed firms invest more and have greater sensitivity to investment opportunities than comparable unlisted companies. Our findings suggest that the role of listing in alleviating financial constraints is more important than potential underinvestment due to myopic behavior. However, the positive relationship between listing and investment is primarily driven by standalone firms. Further analysis confirms that as the number of subsidiaries in a business group increases the positive impact of listing on investment declines. Additionally, when a firm faces financial constraints listing more positively impacts investment. We also document a positive association between stock liquidity and investment for listed firms. Taken together, our results suggest that stock markets play an important role in easing financial constraints and preventing managerial shirking both of which increase investment. Finally, we show that higher levels of owner-ship by financial institutions, board members, and foreign investors increases corporate investment.