Japanese Firms During the Lost Two Decades: The Recovery of Zombie Firms and Entrenchment of Reputable Firms (SpringerBriefs in Economics)

Why has Japan's lost decade become the lost __two__ decades? This book attempts to provide a novel perspective on causes of stagnant productivity growth of the Japanese corporate sector during the lost two decades. Exploiting the corporate financial dataset compiled by the Development Bank of Japan, it shows empirical evidence that an excessive conservative financial policy of firms in good standing were responsible for sluggish reallocation of productive resources after the recovery of “zombie” firms. The questions taken up in the book include: How can “zombie” firms be properly identified only on the basis of financial data? Why did a majority of “zombie” firms eventually recover? Why did the productivity and profitability of the corporate sector as a whole remain low even after the recovery of “zombie” firms? Why did firms in good standing stick to an excessive conservative financial policy and seem reluctant to invest for innovation? What can be the effective prescription to revitalize these firms in good standing? Supported by both in-depth data analyses and rich anecdotal evidence, this book is highly recommended to readers who seek a convincing and comprehensive explanation of Japan's lost two decades from the financial and corporate behavioral points of view. Acknowledgments 6 Contents 7 1 Introduction 9 Abstract 9 1.1 The Lost Two Decades of the Japanese Economy: Still a Puzzle 9 1.2 Zombie Firm Hypothesis and Its Limitations 10 1.3 Purpose and Outline of the Book 12 References 14 2 Evolution and Recovery of Zombie Firms: Japan’s Experience 15 Abstract 15 2.1 Background on the Controversy over Evergreen Lending and Secular Stagnation 15 2.2 Identification of Zombie Firms 17 2.2.1 Conceptual Framework and Methodology 17 2.2.2 Features of the Modified Criteria and Exclusion of “One Shot Zombie Firms” 20 2.3 Evolution and Recovery of Zombie Firms by Three Categories of Financial Support 22 2.4 Empirical Framework to Analyze How Zombie Firms Recovered 25 2.4.1 Multinomial Logistic Model 25 2.4.2 List of Explanatory Variables 26 2.5 Descriptive Statistics 29 2.6 Estimation Results for the Entire Sample Period 29 2.7 Estimation for the Sub-periods 33 2.7.1 Importance of the Sub-period Analyses 33 2.7.2 The First Sub-period (Escalating Phase) 35 2.7.3 The Second Sub-period (Resolution Phase) 35 2.8 Estimation of the Sub-periods by Industry 36 2.9 Concluding Remarks 43 References 44 3 Sluggish Reallocation of Productive Resources After the Recovery of Zombie Firms 45 Abstract 45 3.1 Framework of the Decomposition Analyses of Changes in Aggregated ROA 45 3.2 Result of the Decomposition Analyses of Changes in Aggregated ROA 47 3.3 Weak Demand of Productive Resources from Healthy Firms 48 3.4 Concluding Remarks 51 Reference 52 4 Investment Behavior of Reputable Firms After the Recovery of Zombie Firms: “Conservatism” and the “Pseudo Financial Constraint Effect” 53 Abstract 53 4.1 Introduction 54 4.2 Literature Review 55 4.3 Methodology 56 4.4 Explanatory Variables 58 4.4.1 Data Construction 58 4.4.2 List of Explanatory Variables 59 4.5 Descriptive Statistics 62 4.6 Estimation Results and Interpretation 64 4.6.1 Baseline Estimation for 2005–2010 64 4.6.2 Long-Run Changes in Investment Behavior from 1995 to 2010 68 4.7 Concluding Remarks 72 References 76 5 Final Remarks 77 Abstract 77 5.1 Main Findings of the Book: Unified View for the Lost Two Decades of Japan 77 5.2 Policy Implications and Remaining Issues 79 References 81 Why has Japan's lost decade become the lost two decades? This book attempts to provide a novel perspective on causes of stagnant productivity growth of the Japanese corporate sector during the lost two decades. Exploiting the corporate financial dataset compiled by the Development Bank of Japan, it shows empirical evidence that an excessive conservative financial policy of firms in good standing were responsible for sluggish reallocation of productive resources after the recovery of 2zombie3 firms. The questions taken up in the book include: How can 2zombie3 firms be properly identified only on the basis of financial data? Why did a majority of 2zombie3 firms eventually recover? Why did the productivity and profitability of the corporate sector as a whole remain low even after the recovery of 2zombie3 firms? Why did firms in good standing stick to an excessive conservative financial policy and seem reluctant to invest for innovation? What can be the effective prescription to revitalize these firms in good standing? -- Información de la editorial Front Matter....Pages i-viii Introduction....Pages 1-6 Evolution and Recovery of Zombie Firms: Japan’s Experience....Pages 7-36 Sluggish Reallocation of Productive Resources After the Recovery of Zombie Firms....Pages 37-44 Investment Behavior of Reputable Firms After the Recovery of Zombie Firms: “Conservatism” and the “Pseudo Financial Constraint Effect”....Pages 45-68 Final Remarks....Pages 69-73