Paper short abstract:

This paper examines the extent to which corporate innovations in Japan contribute to firms' market value. It is based on the data of 600 companies from 2005 to 2016 in pharmaceutical, chemical, machinery and electric industries. It operationalizes innovation as R&D spending, patents and citations.

Paper long abstract:

This paper examines the extent to which corporate innovations in Japan contribute to firms' market value. It is based on the data of 600 companies from 2005 to 2016 in pharmaceutical, chemical, machinery and electric industries. The research operationalizes innovative capacities as research and development (R&D) expenditures as well as stocks of patents and citations. The market value of companies is expressed as Tobin's q (market to book ratio).

Although the rich record of related studies dates to the mid-1980s, the Japanese case has not received enough coverage. It matters for the following reasons. Firstly, Japan has a third-largest stock market in the world measured as the market capitalization of listed domestic companies. Secondly, alongside with the growing market for corporate control, Japan has distinct institutional arrangements encapsulated by the pertaining legacy of relational corporate finance and governance. Hence, it presents a rich material for scholars focusing on interaction between markets and institutions.

In line with the existing studies, this paper corroborates that the Tokyo Stock Exchange (TSE) welcomes higher R&D spending, measured both as a stock and as an intensity. On the other hand, it appears that in this institutional setting, market does not react to the mere surge in patents' and citations' stock relative to assets. In turn, Tobin's q is evidently sensitive to measures emphasizing the quality of innovation such as "citations per patent" and "patents per dollar spent on R&D". In addition, current study has found out that the TSE consistently rewards pharmaceutical firms with higher export ratios. This can be explained by the strategic shift in the late 1990s, when many drug companies felt competitive pressure to internationalize, which placed them under a greater market scrutiny.

Paper short abstract:

This paper analyses the monetary policy and central bank communication of the Bank of Japan during 2008-2011 with a focus on two crises: (1) the global financial crises and (2) the Fukushima nuclear disaster. We apply a principal component analysis to reduce the dimensions of monetary policy.

Paper long abstract:

The Global Financial Crisis of 2007-2008 has dramatically changed the public perception of central banking and the conduct of monetary policy. Central banks have introduced so-called unconventional monetary policies (UMP) starting with extremely low or negative interest rates and ending with interventions in government bond markets as well as other asset markets, which are considered potentially risky. At the beginning, UMP were introduced as emergency measures, but remained unchanged until now. So far, there are no signs of "normalization" to the pre-crisis standard.

In the conventional framework, central banks are setting interest rates and the economy adjusts to changes in policy rates through changes in the term structure of the Government bond markets and through adjustments in asset prices of financial markets. However, facing the lower bound of the interest rate and the malfunctioning of some financial markets (financial instability), central banks started to implement more and more complex types of unconventional monetary policy.

This paper analyses the monetary policy and central bank communication (CBC) of the Bank of Japan (BoJ) during 2008-2011 with a focus on two crises: (1) the global financial crises (GFC) and (2) the Fukushima nuclear disaster. We focus on this period because the BoJ has introduced many new measures of monetary policy during that time.

The Bank of Japan can be considered as a forerunner of central banks' adoption of unconventional monetary policies. Some measures are very specific for crises and disasters. However, "general" monetary policies are mingled with emergency measures of the regional economy. That is, one of the distinctive features of UMP is its complexity. Our data-driven analysis applies a Principal Component Analysis (PCA) as a method of dimensionality reduction for the BoJ's monetary policies. In general, PCA confirms our approach that an exclusive focus on interest rates comes short in explaining monetary policy. Results show that the complexity of monetary policy can be reduced to forms of "general" monetary policy and short-term liquidity emergency measures used in crisis times.

Paper short abstract:

In modern banks, implementing sustainable Corporate Social Responsibility(CSR) is essential in order to increase banks of surplus and soundness. This study is to evaluate the effects of CSR on the increase in banks soundness for Japanese banks.

Paper long abstract:

In modern banks, implementing sustainable Corporate Social Responsibility (CSR) is essential in order to increase banks` surplus and soundness. If banks provide high-quality financial services in the best interests of their customers(Depositors), it enhances the productivity of the corporate sector and contributes to steady asset accumulation in the private sector, and the resultant stronger customer base will ensure a stable revenue flow. A perception gap exists between Japanese banks and their customers in terms of banks' lending practices. From the banks' point of view, customers they are willing to finance are scarce, and thus competition through rate discounts becomes fierce; from the customer's point of view, banks won't lend to them without some kind of collateral or guarantee.

The first aim of this study is to evaluate the effects of CSR on the increase in banks soundness for Japanese banks. This empirical analysis is based on a survey on trust and reputation of Japanese banks in relation to CSR.

The second aim of this study is to examine the efficacy of the "Business Model for Creating Shared Value (CSV)," also known as the "Business Model for Japanese Financial Institutions," in increasing corporate value and banks soundness. The Business Model for CSV, officially announced by the Japanese Financial Services Agency (JFSA), is a customer-oriented asset management and intermediation model. At that time, JFSA encouraged banks to voluntarily disclose their initiatives to create customer-oriented business policies. Accordingly, this study will examine the effectiveness of CSV between banks and their customers.

This research revealed a common perception that the expense of CSR is simply one of the costs of doing business as a banks. However, in the changing relationship between CSR and society, I can also think of it as banks beginning to consider CSR as part of their branding strategy. To establish the sustainability of CSR, I will demonstrate the capitalization of brand value for banks through banks` surplus analysis in a two-stage economic model.

※This study is based on Japanese banks date in March 2020.