Borrowing Constraints and the Role of Land Asset in Japanese Corporate Investment Decision

Ogawa, Kazuo; Kitasaka, Shin-ichi; Yokota, Hiroshi; Iwata, Yasuharu

doi:10.1006/jjie.1996.0007

Cited by 40 publications

(20 citation statements)

References 5 publications

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“…Net worth was chosen because of the role it plays in credit-constraint models such as Moore (1994, 1995). Land prices were chosen again because of their value as collateral in credit-constraint models [see Ogawa et al (1994) for an application to Japan], and, more generally, because of the role land price fluctuations may have played in encouraging speculative behavior (e.g., Chirinko and Schaller, 1995).…”

Section: Results For Alternative Specificationsmentioning

confidence: 99%

Business Fixed Investment and the Recent Business Cycle in Japan

Kiyotaki

West

1996

NBER Macroeconomics Annual

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Section: Results For Alternative Specificationsmentioning

confidence: 99%

Business Fixed Investment and the Recent Business Cycle in Japan

Kiyotaki

West

1996

NBER Macroeconomics Annual

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“…They found that investment by firms with a close relationship to a bank is less sensitive to internal cash flow than investment by independent firms. Ogawa et al (1996) estimated Euler-type investment functions and presented evidence that SMEs are more likely to be liquidity constrained.…”

Section: Literature Reviewmentioning

confidence: 99%

Financial Constraints on Intangible Investments: Evidence from Japanese Firms

Morikawa

2014

Intangibles, Market Failure and Innovation Performance

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This paper uses Japanese firm-level data to analyze empirically the financial constraints in intangible investments. We estimate investment functions in which cash flow is used as a key explanatory variable. We then observe differences in the sensitivity of investments to cash flow by the type of assets, industry, firm size, and firm age. According to the estimation results, investments in intangible assets are more sensitive to internal capital compared with investments in tangible assets, suggesting the existence of market failure in the financial markets. This market failure is more serious for small-and medium-sized enterprises (SMEs) and young firms. However, policies to promote investments are concentrated on tangible assets, with the exception of research and development (R&D) investment. This paper suggests that investment tax credits and financial support for SMEs and young firms should focus more on intangible investments.

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“…A second direction for future research involves considering the effects of regulations, in particular on land use. A final direction involves considering alternative explanations of the link between land and capital, including credit constrained models in which land serves as collateral, such as Kiyotaki andMoore (1997a, 1997b) and Ogawa et al (1996).…”

Section: Discussionmentioning

confidence: 99%

“…One possibility is regulations, in particular on land use. A second is credit constraints (Ogawa et al (1996), Kiyotaki (1998)). …”

Section: Introductionmentioning

confidence: 99%

Land Prices and Business Fixed Investments in Japan

Kiyotaki

West

2004

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Japan has seen episodes in which boom and bust in land prices is accompanied by boom and bust in business fixed investment. We develop a model that includes land in the production function. We show that in this model movements in land prices will be associated with movements of the capital stock in the same direction, provided the elasticity of substitution between land and capital is greater than one. We then estimate an aggregate investment function. Consistent with an elasticity greater than one, increases in land prices are associated with increases in the business capital stock even after controlling for movements in output and the cost of capital; decreases have a symmetric effect.In the end, however, we find that movements in land prices explain relatively little of the movement in the business fixed investment. In addition to possibly indicating that the elasticity is very near one, the small effect may result because of difficulty in extracting information from noisy land prices, neglect of the effects of regulations, and failure to consider credit constraints.

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Borrowing Constraints and the Role of Land Asset in Japanese Corporate Investment Decision

Cited by 40 publications

References 5 publications

Business Fixed Investment and the Recent Business Cycle in Japan

Business Fixed Investment and the Recent Business Cycle in Japan

Financial Constraints on Intangible Investments: Evidence from Japanese Firms

Land Prices and Business Fixed Investments in Japan

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