Published papers

This study investigates the effect of shareholder proposals on the market value of Japanese firms in the second wave of activism from 2017 to 2021. While announcements of receiving a shareholder proposal positively affect stock prices of investee companies, rejection of a shareholder's proposal has a negative impact. Unlike the first wave of activism, proposals related to the election and dismissal of directors are no different from those of other proposals, which may become more important as shareholder proposals diversify. Similar to the first wave, market responses become larger when the large shareholders made the proposals.

This study examines the effects of research and development (R&D) on the market value of Japanese pharmaceutical companies. Based on 1,345 news articles, our event study analysis of 74 Japanese pharmaceutical companies from 1 January 2010 to 31 December 2021 revealed three key findings. First, the stock prices of the aforementioned companies generally respond positively to the business news, and more specifically, R&D-related news. Second, the impact on the share price is more pronounced as the R&D progress to more advanced stages. Lastly, the stock price responses to R&D news tend to diminish as the size of pharmaceutical companies increases.

This study examines the relationship between proxy advisory firms’ recommendations and investors’ voting behavior in Japan, where corporate governance has been under transition. Based on 1,025 shareholder meeting proposals and recommendations by proxy advisory firms in Japan between March 2010 and March 2022, multivariate regression analyses reveal that the dissenting recommendations of the two main proxy advisory firms are negatively correlated with the approval rate of proposals, as well as the percentage of affirmative votes cast by institutional investors. Furthermore, the institutional investors’ behavior is more consistent with the recommendations of proxy advisory firms than that of other investors.

This paper examines how an increase in international borrowing changes the probability of bank runs or currency crises under the fixed exchange rate regime. Capital inflows with a negative cross-border return differential may increase the probability of runs. © Elsevier Science B.V.

This article investigates stock market reactions to announcements related to the introduction of the Financial Instruments and Exchange Law or the so-called Japanese Sarbanes-Oxley Act (J-SOX), which was enacted to reinforce corporate accountability and responsibility. We find that the announcements leading to the passage of the J-SOX raised stock prices of firms listed on the First Section of the Tokyo Stock Exchange. Another finding is that firms with a high ratio of foreign shareholders or leverage experienced more positive stock price reactions. By contrast, whether the firm was audited by Big 4 audit firms did not seem to matter to investors. In addition, large firms tended to have more negative stock price reactions than small firms.

This article investigates the price movements of home electronics products listed on a Japanese price comparison site. Our findings are as follows. (1) Price dispersion increases at earlier stages of the product life cycle and decreases at later stages. (2) The size of the price changes is larger in earlier stages than in the later stages. (3) The lowest prices change very frequently. (4) The lowest price decreases outnumber the lowest price increases. (5) The size of the lowest price changes is very small and is smaller when decreases occur than when increases occur. © 2008 Elsevier B.V. All rights reserved.

We examine how an auditor’s reputation for audit quality affects the selection of new auditors in a unique setting. Specifically, we investigate forced auditor switches after the collapse of ChuoAoyama and its successor, Misuzu, in a low litigation country, Japan, where the insurance value of auditing is minimal. We find that former ChuoAoyama clients with greater reputation concerns tended to switch away from Misuzu, a low-quality Big 4 audit firm. Our results also indicate that auditors’ sensitivity to reputation decreased after the collapse of Misuzu, perhaps because of intensified capacity constraints and decreased differences in perceived audit quality between Big 4 and Non-Big 4 auditors after the audit scandal and the introduction of the J-SOX.

This article investigates whether and how the Japanese Financial Services Agency's mandatory use of XBRL affects investors in assessing financial information. Although regulators expect the introduction of XBRL to enhance the transparency and quality of business reporting, given the non-trivial implementation and learning costs, whether the XBRL-based disclosure reduces the information asymmetry between sophisticated and less-sophisticated investors remains an empirical question. As prior studies in other countries employing mandatory XBRL adoption provide mixed results, our analysis of the Japanese case should be somewhat insightful because Japan is one of the few countries where thousands of listed firms were forced to use the XBRL format all at once. By examining various measures in the pre- and post-XBRL periods, we provide evidence consistent with the notion that the adoption of XBRL has helped to improve the information environment, as indicated by the reduction of event returns volatility, absolute cumulative abnormal returns, changes in the standard deviation of returns, and the abnormal bid-ask spread.

The globalization of audit markets not only provides an opportunity for the U.S. Big 4 auditors to establish international expertise through global networks, but it also exposes them to reputation risk arising from the acts of their local partners. We analyze the audit failure of ChuoAoyama, one of the Japanese Big 4 audit firms, and find that its credibility impairment reduced security prices of not only the clients of PricewaterhouseCoopers (PwC), their U.S. affiliate, but also the American clients of all other Big 4 auditors affiliated with the Japanese Big 4. Because the quality of the U.S. audit firms is perceived as superior to that of auditors in other countries, we also analyze the premiums arising from the affiliation with the U.S.-led global audit firm networks. We compare the effect of Andersen’s audit failure with ChuoAoyama’s in Japanese capital markets and find that the magnitude of negative market reactions is larger for Andersen’s failure than for ChuoAoyama’s. Together, these results suggest that global audit firm networks have created a network-wide reputation for their services that is susceptible not only to audit failures of the U.S. Big 4 but also to those of non-U.S. affiliates and that there is a quality premium for the U.S. Big 4 in Japanese markets. Our results provide a rational explanation for PwC’s aggressive efforts to temper the negative impact of ChuoAoyama’s failure on their reputation.