What Drives Foreign Ownership in Japan? Evidence from Before and After Japan's Financial Crisis

Abstract

The ownership structure of Japanese firms has long been characterized by the superiority of ownership by banks and business partners; however, after the mid-1990s, the relative share of foreign ownership increased significantly. Results from this study suggest that almost 90% of the variance in foreign ownership occurs within and between firms. As expected, a substantial percentage of the variance of foreigner ownership is explained by macroeconomic shocks. The results indicate that firm size, profitability, dividends, risk, and financial health are important factors that drive foreign ownership.

Keywords:

• foreigner ownership
• hierarchical linear modelling
• Japan

ACKNOWLEDGMENTS

This work is supported by the Japan Society for the Promotion of Science (JSPS) Postdoctoral Fellowship for Foreign Researchers (Grant-in-aid for JSPS Fellow No. P09016). We would like to thank the anonymous referees for their valuable comments.