Japanese keiretsu
Mergers and Acquisitions
30-14
Cash versus Common Stock
• Overvaluation
– If the target firm shares are too pricey to buy with cash, then go with stock.
• Taxes
– Cash acquisitions usually trigger taxes. – Stock acquisitions are usually tax-free.
Tafrig p rm e a ty o N ufe tiw rv m alue
Nesw hairsessued
OsldharN esesw hairsessued
McGraw-Hill/Irwin
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
• The main reason why they do not lies in failures to integrate two companies after a merger.
– Intellectual capital often walks out the door when acquisitions aren't handled carefully.
– If two all-equity firms merge, there is no transfer of synergies to bondholders, but if…
• One Firm has Debt
– The value of the levered shareholder’s call option falls.
日本管理制度英文叫什么
日本管理制度英文叫什么Introduction:The management system in Japan is often regarded as unique and successful, as it has contributed significantly to the growth and development of Japanese industries and the overall economy. This system is deeply rooted in Japanese culture and values, and it is characterized by a strong emphasis on teamwork, discipline, and continuous improvement. In this article, we will explore the key features of the Japanese management system, its historical background, and its impact on the performance and competitiveness of Japanese companies.Historical Background:The modern Japanese management system has its roots in the post-World War II era when Japan was undergoing a rapid process of industrialization and economic reconstruction. During this period, the Japanese government played a crucial role in promoting and supporting the development of domestic industries through various policies and initiatives. One of the key measures was the establishment of the Ministry of International Trade and Industry, which provided guidance and resources to help Japanese companies modernize and expand their operations. Additionally, the government encouraged the formation of keiretsu, which are intricate networks of interlinked companies and suppliers that collaborate closely with each other. These keiretsu played a critical role in fostering long-term relationships and mutual support among member companies, thereby strengthening the overall competitiveness of the Japanese industry.Key Features of the Japanese Management System:1. Lifetime Employment:One of the distinguishing characteristics of the Japanese management system is the practice of lifetime employment, which entails companies offering job security and long-term career prospects to their employees. In Japan, it is common for workers to join a company after graduating from university and to remain with the same employer until retirement. This commitment to lifelong employment fosters loyalty and commitment among employees, and it also incentivizes them to invest in their skills and professional development.2. Seniority-based Promotions:Japanese companies typically adhere to a seniority-based promotion system, wherein employees are rewarded based on their length of service and experience rather than their individual performance. This approach is intended to create a stable and predictable career progression for employees, and it also reflects the Japanese emphasis on respect for elders and hierarchical order in the workplace.3. Group-oriented Decision Making:Another hallmark of the Japanese management system is its emphasis on group-oriented decision making, whereby consensus-building and collaboration are highly valued. In Japanese organizations, decisions are often made through a process of collective discussion and agreement among employees, supervisors, and various stakeholders. This approach promotes cooperation and harmony within the workplace, and it also encourages employees to contribute their ideas and opinions to the decision-making process.4. Continuous Improvement (Kaizen):The concept of continuous improvement, known as kaizen in Japanese, is deeply ingrained in the management philosophy of Japanese companies. Kaizen emphasizes the need for ongoing efforts to enhance quality, productivity, and efficiency in all aspects of the business. Japanese companies are known for their relentless pursuit of excellence and their commitment to eliminating waste and inefficiency through incremental improvements in processes and operations.5. Quality Control and Total Quality Management (TQM):Japanese companies place a strong emphasis on quality control and total quality management as essential elements of their management system. This commitment to excellence is exemplified by the renowned Japanese approach to quality improvement, such as the "Five S" methodology (seiri, seiton, seiso, seiketsu, and shitsuke) and the pioneering work of quality gurus like W. Edwards Deming and Joseph M. Juran. TQM principles have been widely adopted by Japanese businesses to ensure the highest standards of product and service quality.Impact of the Japanese Management System:The Japanese management system has had a profound impact on the performance and competitiveness of Japanese companies across various industries. Notably, it has contributed to the success of leading Japanese corporations in automotive, electronics, consumer goods, and other sectors, enabling them to achieve global recognition and market leadership. The emphasis on teamwork and collaboration has helped Japanese companies to foster strong organizational cultures and high levels of employee engagement, which are essential factors in driving innovation and achieving operational excellence. Additionally, the commitment to continuous improvement has enabled Japanese companies to adapt to changing market conditions and technological advancements, remaining agile and resilient in the face of global competition.Challenges and Evolving Trends:While the Japanese management system has many strengths, it also faces challenges and evolving trends in the contemporary business environment. In recent years, demographic changes, economic pressures, and increasing globalization have posed significant challenges to the traditional practices of Japanese management. The aging population and declining birth rates in Japan have led to labor shortages and demographic imbalances, promptingcompanies to reassess their employment practices and talent management strategies. Moreover, the rise of digital technologies and the expansion of global supply chains have necessitated greater flexibility and adaptability in the way Japanese companies operate and compete.In response to these challenges, Japanese companies are embracing new approaches to management and organizational practices, such as greater emphasis on merit-based promotions, increased flexibility in employment arrangements, and the adoption of agile methodologies and digital tools to enhance productivity and innovation. Furthermore, Japanese firms are actively seeking to diversify their workforces and leadership teams to promote inclusivity and harness a wider range of talents and perspectives.Conclusion:In conclusion, the Japanese management system is a distinctive and influential model that has shaped the performance and success of Japanese companies for many decades. Its emphasis on lifetime employment, seniority-based promotions, group-oriented decision making, continuous improvement, and quality management has yielded significant benefits in terms of organizational culture, employee engagement, and operational excellence. However, in the face of evolving business dynamics and demographic shifts, Japanese companies are undergoing a process of adaptation and transformation to remain competitive and relevant in the global marketplace. As they navigate these challenges, the enduring principles of the Japanese management system, coupled with innovation and openness to change, will continue to be vital drivers of success for Japanese businesses in the years ahead.。
博鳌亚洲论坛2002年会：日本首相小泉纯一郎主旨演讲
“Asia in a New Century- Challenge and Opportunity” Your Excellency， Premier of the State Council of the Peoples' Republic of China， Zhu Rongji， Your Excellency， Prime Minister of the Republic of Korea， Lee Hang Don， Your Excellency， Prime Minister of Kingdom of Thailand， Taksin Shinawatra， Your Excellency， Former Prime Minister of Australia， Robert Hawk Ladies and Gentlemen， It is a great honor for me to stand before you today at the First Annual Conference of the Boao Forum for Asia. I would like to express my appreciation to the organizers of this meeting——the Boao Forum for Asia and the Government of the People's Republic of China， which has provided support for the convening of this meeting. As an economic special zone and faced to the Pacific Ocean， Hainan Island symbolizes the open character of Asia. Back in the 8th century， a monk named Jianzhen—on his way to Japan to teach the doctrines of Buddhism—found himself shipwrecked and washed upon the shore of this island. Even today the people of my country well remember the story of Jianzhen， who though blind finally succeeded in traversing the seas to Japan. Jianzhen brought with him a deep knowledge of medicine， even curing a disease afflicting the Emperor Shomu's mother. He established the famous temple，“Tosho-daiji” in Nara， which has a Greek influence in its architecture. Jianzhen made a great contribution in sharing spiritual culture and knowledge of the world beyond national frontiers. Hainan Island with such a background， is an appropriate location to discuss Asia's future in the new century. （A New Century in Asia） Ladies and gentlemen， What values should we pursue for the prosperity of this region in the new century？ I believe that the three values of freedom， diversity and openness are the driving forces behind peace and development in Asia. Firstly， it goes without saying that freedom refers to democracy and human rights politically. Economically， it means development of a market economy. Political freedom and economic freedom are reinforcing each other in the process of their development. With some twists and turns， Asia as a whole has been taking significant steps towards freedom over the last half century. Transition to a democratic political system or its reform has been inevitable， as economic development has created the conditions for the emergence of a middle class and a civil society. I believe the historic trends that are apparent in Asia should be a source of pride for all of us. Secondly， development in Asia has occurred against a background of tremendous diversity， where each country has its own distinctive history and social and cultural values. Naturally， we thus see differences in the processes and speed of development. While respecting diversity， however， it is important for us to promote our common interests and our shared goals， recognizing positive influences of each other based on differences among countries. In other words， we must leave behind parochial nationalism and dogmatism， promote mutually beneficial cooperation based on equality in order to enjoy prosperity – this should be our guiding principle. Thirdly， our cooperation must not be of an inward-looking， closed nature， but one characterized by openness to the world outside Asia. In a world economy where globalization is advancing and economic integration， such as in Europe and the Americas， is proceeding， cooperation by Asia both within and with other regions must be pursued. This cooperation must be based on the principles of openness and transparency. I believe Asia should set an example for the world by seeking a regional cooperation that surpasses national and ethnic distinctions. So， as we pursue prosperity in a free， diverse and open Asia， what are the specific challenges that face us？ I would like to discuss three challenges： reform， cooperation and the importance of conveying Asia's message to the world. （Reform） Ladies and gentlemen， When I visited the ASEAN countries in January， I emphasized my belief that for further development to take place in Asia as a whole， it is necessary to increase the economic resilience and competitiveness of each nation. Reform is the key to achieving this. Each country's individual reform efforts combined with our joint reform efforts will strengthen the competitiveness of the entire region. I know that it is most important that Japan， which alone accounts for 60% of Asian GDP， be successful in its structural reform and the economic revival. Since the 1990s， Japan has continuously tried economic reform， which was not sufficient enough. Since my appointment as Prime Minister a year ago， I have made the acceleration of structural reforms a matter of the highest priority. It is very clear to me that there will be “no growth without reform.” In the new circumstances， Japan's past success has now become an impediment to further success. We have no choice but to transform ourselves from a government-led society to a private-sector-led society with more decentralization of power from central government to local governments. While this dramatic transformation will undoubtedly be accompanied by a great deal of pain， as are all historic transitions， I am firmly resolved to fulfill these reforms for the sake of both Japan and all of Asia. These structural reforms include the final disposal of non-performing loans over the course of the next two to three years， the reform of government-affiliated corporations， the privatization of the post-office businesses， the abolition of regulations that obstruct free private-sector economic activities and reform of rigid fiscal and social systems. These reforms are already underway， and the Japanese economy， in particular the private sector's new dynamism，is beginning to move forward. For example， with the rapid unwinding of the cross-holding of shares， mergers and corporate partnerships are beginning to replace the old keiretsu system. Applications for international patents are also rising dramatically. Foreign investment in Japan is also playing a role in revitalizing Japan's economy. In some Japanese carmakers，foreign chief executive officers have been leading in restructuring activities， and foreign capital is also pouring into the distribution industry. Here in China， President Jiang Zemin， Premier Zhu Rongji—who is present here today—other Chinese leaders，and the Chinese people themselves are advancing the cause of reform and openness. I am proud to say that Japan， as a friend of China， has been supporting such efforts. Some see the economic development of China as a threat. I do not. I believe that its dynamic economic development presents challenges as well as opportunity for Japan. I believe a rising economic tide and expansion of the market in China will stimulate competition and will prove to be a tremendous opportunity for the world economy as a whole. Since there are differences in our industrial structures， Japan and China can strengthen their mutually complementary bilateral economic relations. I see the advancement of Japan-China economic relations， not as a hollowing-out of Japanese industry， but as an opportunity to nurture new industries in Japan and to develop their activities in the Chinese market. Our integrated efforts for economic reform in both countries should advance the wheel of economic relations. In this regard， it is of utmost importance for China to behave in accordance with international rules by making a smooth transition into the World Trade Organization （WTO） regime and to promote harmonious cooperation with the regional economies of Asia， including ASEAN. At the same time， it is important for the ASEAN countries to improve their investment climate to spur their self-reliant efforts so that they will be able to overcome new competition. Japan will certainly provide the necessary support to help achieve these goals. To advance reform and mutual interdependence between Japan and China， in a manner that is harmonious with reforms of other Asian nations -that is the way to develop a wider cooperation in Asia as a whole. （Cooperation） Ladies and gentlemen， In Singapore in January， I spoke about cooperation that focuses on East Asia. Today I would like to call for a widened sphere of cooperation， including Central and West Asia. Above all， we must create new momentum for cooperation in the five areas of energy， environment， currency and finances， trade and investment and development assistance. Firstly， the development of the Asian economy requires a stable supply of energy. But do we have a sufficient cooperative structure in place to ensure this？ Energy demand is increasing around the world， but the greatest increase is foreseen here in Asia， an area of remarkable economic growth. We are dependent on the Middle East for the great majority of our oil， yet most countries in our region do not have the necessary oil stockpiles. Since the 1970s， Japan has been adding to its oil stockpile， which today stands to last 160 days. We have also been promoting measures for energy conservation. Japan is eager to contribute to the region's energy security by sharing our experience and technology. I would also like to use this forum to call for cooperation with Central Asia， which has great potential as a source of energy. I will dispatch to Central Asia this year a “Silk Road Energy Mission，” comprised of Japanese industry，government and academic experts， to encourage such cooperation. Next， I believe we should increase regional cooperation in the environmental area. Today， more than 30% of allJapanese Official Development Assistance is for environmental assistance， the largest share of which is designated for Asia. Right here on Hainan Island， Japan is contributing to the protection and utilization of tropical forests. Efforts to achieve sustainable development without environmental destruction should be made， and all the countries of the region must tackle this together. Japan is ready to share its past experiences in combating environmental pollution in order to further promote cooperation for resolving various environmental problems in Asia.。
(范例)外文翻译格式
本科毕业设计（论文）外文翻译译文学生姓名：院（系）：经济管理学院专业班级：市场营销0301班指导教师：完成日期：2007年3 月22 日日本的分销渠道——对于进入日本市场的挑战与机会Distribution Channels in JapanChallenges and Opportunities for theJapanese Market Entry作者：Hokey Min起止页码：P22-35出版日期（期刊号）：0960-0035出版单位：MCB Univercity Press外文翻译译文：介绍尽管美国对日本的出口在过去两年已有大幅度的增长，然而美国对日本仍然存在着很大的贸易赤字。
尽管没有出现下降趋势，但越来越多的美国决策者及商务经理已经开始审查日本的贸易活动。
在这些人中，有一个很普遍的想法就是日本市场没有对美国产品开放，相反，美国市场对日本的贸易是开放的。
因此，克林顿政府试图采取强硬措施来反对日本的一系列贸易活动，包括商业习惯和政府政策，还企图通过贸易制裁的威胁来反对日本产品。
然而，这样的措施也会产生适得其反的结果。
它不仅会为美国消费者带来更高的商品价格和更少的商品选择，同时也会增加日本消费者的反美情绪。
最近Ginkota和Kotabe的调查表明：单独的贸易谈判不会提高美国商品进入日本市场的能力。
而对于提高美国公司进入日本市场能力的一个行之有效的方法就是研究日本近几个世纪以来所采用的商业活动。
由于法律障碍或者是日本公司对外封锁商业渠道，日本当地的分销渠道往往对外国公司不利，而这样的商业活动被认为是进入日本市场的主要障碍。
事实上，Yamawaki美国商品成功出口到日本市场在很大程度上取决于美国解决协议合同的能力。
尽管进入日本市场意义重大，然而对西方人而言，日本的经销体系经常会被人误以为是充满神秘感的。
这种误解源于日本复杂的分销惯例特征。
而这种分销惯例沿袭古老的而又严谨的建设体系。
在尝试美国贸易在日本市场成功获利减少不必要的贸易冲突过程中，我们揭露了日本分销中获利的事实，探索出了能成功进入日本市场的战略性武器。
英语中的日语词
鋤焼〔き〕 （寿喜焼、すきや 寿喜烧（日式牛肉火锅） き） 相撲（すもう） 擂〔り〕身（すりみ） 寿司61（すし） 足袋（たび） 蛸焼〔き〕 （たこやき） 溜り63（たまり） 短歌（たんか） 狸（たぬき） 畳（たたみ） 鉄板焼 〔き〕 （てっぱんやき）
-6-
相扑 鱼浆，蟹香鱼肉棒 寿司 （日本式）短布袜 章鱼烧，章鱼小丸子 溜酱油 短歌64 狸子（皮） 榻榻米 铁板烧
-7-
豆腐 凹间，壁龛66 （神社入口的）牌坊 （日本刀的）护手 1. 坪 2. 穴位，穴道 海啸 乌冬面 浮世绘 卫生筷，一次性筷子 山葵70，山萮 日本陶瓷 烤鸡肉串，日式烧鸡 野寇崽，日本瘪三 大和民族（的一员） 大和绘 浴衣 日本柚子73 财阀 财术 坐禅 禅
zori
草履（ぞうり）
草屐，草鞋，人字拖
級（きゅう） 弓道（きゅうどう） 巻〔き〕物（まきもの） 巻〔き〕鮨（まきずし） 漫画（まんが） みかど（御門、帝） みりん（味醂） 味噌（みそ） 餅（もち） ナシ（梨） 納豆（なっとう）
（柔道等中的）级 弓道 （横幅）卷轴 寿司卷 漫画 天皇 味淋 味噌，日本豆面酱 糯米团，麻糬 梨 纳豆 （系在烟荷包、钱包等绳
野葛，葛藤 日本姑娘 艾绒，干艾 人力车，黄包车，洋车 少量，一点点 酱油 拓麻歌子，电子鸡 短棍术，短棍 天妇罗，天麸罗 大亨，巨头，巨擘 天蚕 圆，日元
-8-
本文列出的仅为一些常见词汇，亦含部分专业用语，但不包括人名、地名等专有名词。另 有一些词语，因仅见诸部分词典，多数词典未加收录，今附于下方，权供参考，汉语释义恕 不写出。详细资料请阅 List of English words of Japanese origin 及日本語から英語への借用。 akebi アケビ basho 場所 burakumin 部落民 dango 団子（だんご） fujoshi 腐女子 gagaku 雅楽 izakaya 居酒屋（いざかや） Kakiemon 柿右衛門 Kakuro カックロ Kawasaki disease 川崎病 keiretsu 系列 kondo 金堂（こんどう、きんどう） konjac コンニャク maruyu マル優 mawashi 回し Moyamoya disease もやもや病 Nisei 二世 Nurikabe ぬりかべ pachinko ぱちんこ raku ware 楽焼（らくやき） reishi 霊芝 sansei 三世 shashin 写真 shokku ショック Tanabata 七夕（たなばた、しちせき） tsutsugamushi disease ツツガムシ病 umami 旨味、旨み utchari 打〔っ〕遣〔り〕 wagyū 和牛 Yayoi 弥生 这里的“变化”是针对依照假名写出的罗马字而言，如将 円（en）写成 yen；但省去长 音 う（u）例外，如将 道場（doujou）写成 dojo。 1 韩国也有所谓的合氣道（합기도） ，英文作 hapkido。 2 A type of Japanese animated film with themes and styles similar to manga comics. “アニメ” 是“アニメーション” （animation）的略称。 3 = Lantern Festival, Festival of the Dead. A Japanese Buddhist festival that takes place in August, when people show respect to the dead. “盆”是“盂蘭盆（うらぼん） ”的略称。 4 和製英語， 是 costume play （コスチューム・プレイ） 的缩略；表演者一般被称为 cosplayer （コスプレイヤー） 。 5 如 He is a 6th dan at judo. 彼は柔道 6 段だ。他柔道 6 段。 6 用海带、狐鲣鱼煮出的高汤，烹饪用。 7 指自创的、不受商业影响的动漫、游戏作品。 8 A room or hall for the practice of martial arts (as judo or karate).（教授柔道、空手道等的）武 术馆。
吉住涉
基本简历
星座：双子座 兴趣：旅行、shopping 语言：日语、英语 收集品：耳环 喜欢名人：The Yellow Monkey 喜爱食物：Cream Kiss Chocolat 希望饲养的动物:猫 难忘经历：在大学毕业旅行去欧洲 梦想:以做自己喜欢的事悠闲地生活 出道作：《过激罗曼史》（1984年[Ribon Original 初夏号]《初夏恋爱号！》 最满意的作......
吉住涉
日本漫画家
01 基本简历
03 主要作品
目录
02 漫画风格
吉住涉，1963年6月18日出生于东京都，喜欢花花草草，曾为了看富野的薰衣草而在刚截稿的半死状态下跑 去北海道；也喜欢种花花草草——虽然进行的“培育实验”大都以失败告终；当然更喜欢种子，曾买了十几种放 在玻璃瓶中欣赏，并当作礼物送给朋友。喜欢花草的人自然抵不住美丽可爱的东西的诱惑，对吉住涉来说，放松 心情的最佳方法就是在旅行中“血拼”——到文具用品店、杂货店、书店、超市等地方寻找宝藏，是个有爱心的 人。
她直到现在仍然有为《Ribon》画漫画。此外，她也有画女性漫画，如2回的短故事《Happiness》，并刊 登在集英社另一杂志《Chorus》上。
除了画漫画，吉住涉也喜欢旅行和逛街购物，她最喜欢的食物是巧克力，喜欢的颜色是蓝色。
在吉住涉的笔下是不会出现丑陋的人或物的，从《帅气女朋友》到《魔法留学生》，她的每一部......
漫画风格
吉住涉 橘子酱男孩(14张)
介绍:
吉住涉在担任办公室女文员时开始画漫画，处女作是短篇漫画《Radical Romance》，连载于集英社的 1984年《Ribon Original》初夏号。
吉住涉在《Ribon》（りぼん）的第一个连载是1988年开始的《帅气女朋友》，单行本共有9本，这也是令 吉住涉开始在日本出名的首个作品。接着的作品是1992年至1995年的《橘子酱男孩》，这是她的最著名的作品， 也是令她得到日本和国际肯定的作品。之后又推出《只爱你一人》和《薄荷关系》。2000年，她创作了共三册的 短故事《一起散散步》，还有紧接2001年的《恋爱小魔女》，这也是继《帅气女朋友》和《橘子酱男孩》后，有 拍成电视动画的作品。其它作品有《Baby It's You》（பைடு நூலகம்于《Ribon Original》2005年12月号）、《P×P》等。
Operations Strategy and Competitiveness(英文版)(ppt 20页)
Warranty
Travel Planning
Irwin/McGraw-Hill
Leases
Roadside Assistance
Loaner Vehicles
©The McGraw-Hill Companies, Inc., 1998 7
A Framework for Manufacturing Strategy
Irwin/McGraw-Hill
©The McGraw-Hill Companies, Inc., 1998 16
Productivity
Producttyi=vO i utputs Inputs
Information Management
8
Strategy Begins with Priorities
Consider the case of a personal computer manufacturer.
1. How would we segment the market according to product group?
– Minimize manufacturing’s negative potential
– Management control systems
Stage II--Externally Neutral
– Achieve parity with competitors
– Follow industry practice
Operations Strategy
Customer Needs
Corporate Strategy
Alignment
Operations Strategy
Core Competencies
国际会计第七版英文版课后答案(第九章)
Chapter 9International Financial Statement AnalysisDiscussion Questions1. a. Business strategy analysisDifficulties in cross-border business strategy analysis: Identifying key profit drivers and business risk in two or more countries can be daunting. Business and legal environments and corporate objectives vary around the world. Many risks (such as regulatory risk, foreign exchange risk, and credit risk) need to be evaluated and brought together coherently. In some countries, sources of information are limited and may not be accurate.b. Accounting analysisDifficulties in accounting analysis: Two issues are important here. The first is cross-country variation in accounting measurement quality, disclosure quality, and audit quality. National characteristics that cause this variation include required and generally accepted practices, monitoring and enforcement, and extent in managerial discretion in financial reporting. The second issue concerns the difficulty in obtaining information needed to conduct accounting analysis. The level of credibility and rigor of financial reporting in Anglo-American countries generally is much higher than that found elsewhere. In fact, financial reporting quality can be surprisingly low in both developed and emerging-market countries.c. Financial analysis (ratio analysis and cash flow analysis)Difficulties in financial analysis: Extensive evidence reveals substantial cross-country differences in profitability, leverage, and other financial statement ratios and amounts that result from both accounting and non-accounting factors. Differences in financial statement items caused by national differences in accounting principles can be significant, and unpredictable in amount. Even after financial statement amounts are made reasonably comparable, interpretation of those amounts must consider cross-country differences in economic, competitive, and other conditions.d. Prospective analysis (forecasting and valuation)Difficulties in prospective analysis: Exchange rate fluctuations, accounting differences, different business practices and customs, capital market differences, and many other factors have major effects on international forecasting and valuation. Application of price multiples in a cross-border setting requires that the determinants of each multiple, and reasons why multiples vary across firms, be thoroughly understood. National differences in accounting principles are one source of cross-country variations in these ratios.Finally, all four stages of business analysis may be affected by:i. information access,ii. timeliness of informationiii. foreign currency issuesiv. differences in financial statement formatsv. language and terminology barriers.2. Here we will consider the information needs of investors, creditors, regulators, and competitors.Investors have high information needs at all stages of business analysis. They need to be able to accurately assess the merits of the company’s business strategy, the quality of its accounting, the company’s financial strength, and its future prospects. Since each step in the business analysis process builds on its predecessors, each step is critical in its turn. It can’t be said that any one step is more or less important than the others.Creditors need to go through much the same analysis, but are advantaged in that through direct contact with the companies they often have more extensive and detailed information than do investors. The goal of analysis is also often somewhat different. Many investors, hoping that their shares will increase in value, are interested in prospective analysis. The creditor’s interest is more often limited to being sure (with a margin of safety) that the loan will be repaid. For the creditor, the accounting analysis, financial analysis, and forecasting, all are important; valuation is less so. Regulators have much different interests. Since regulators have no direct interest in the future earnings of the companies they regulate, a prospective analysis (in most cases) is of limited value to them. However, if regulators need to be aware of the financial strength of the companies they regulate, they will need to conduct accounting analysis and (in many cases) financial analysis, particularly when assessing how much of an economic burden can be imposed on companies resulting from a particular regulation.Competitors are intensely interested in finding out as much about a company as possible. Business strategy analysis of one’s competitors is an important part of formulating one’s own business strategy, especially in terms of assessing strengths and weaknesses. Accounting and financial analysis also can uncover strengths and weaknesses. Prospective analysis may be important if a merger or acquisition is contemplated.3. Information accessibility is a major condition for an efficient capital market, that is, information must be rapidly analyzed and made available to investors capable of acting on it. In the United States and other broadly-based financial markets, a whole industry specializing in information analysis and dissemination has developed. Similar investment analysis services in many non-U.S. capital markets are at an earlier stage of development.4. Investment analysis almost always involves paired comparisons, even if the benchmark alternative is to do nothing. In evaluating the risk and return characteristics of a non-domestic company differences in accounting measures of risk and return are often due as much to differences in measurement rules between countries as they are to real economic differences. Corporate transparency compounds the problem by depriving analysts of information necessary to adjust for national measurement differences. Many analysts consider the disclosure issue to be even more important than measurement differences.5. One way of coping with GAAP differences is to restate foreign accounting measures to an internationally recognized set of principles or the reporting framework of the investor’s home country. An alternative tack is to develop a detailed understanding of accounting practices in the investee’s country.Students will definitely disagree on this one. Eventually some will offer a compromise: use the former coping mechanism if the investee company is being compared with a firm in the investor’s home country and adopt a “multiple principles capability” when comparing the investee company to another company in the same country. Another tack would be to examine who is making the market for the investee’s shares. If local investors are making th e market, one should not ignore local norms. However, if investors in the investor’s country are making the market; e.g., U.S. institutional investors, then restatement to the investor’s home country GAAP makes sense.6. Prospective analysis invo lves forecasting a firm’s future cash flows and then valuing those cash flows. As future cash flow estimates are based on accounting measurements, differences in measurement rules between countries complicate this effort. The range of accounting choicesavailable abroad add to this complexity. However, measurement differences are only one of the variables that complicates prospective analysis, Differences in environmental variables such as rates of inflation, sovereign risk, business practices, and institutions complicate both forecasting and valuation. Different institutions include financial norms, tax regimes and market enforcement mechanisms. In terms of valuation, while P/E multiples may be popular in one country, discounted dividends may be more popular in another. Even if two countries employ the same valuation framework, differences in investment horizons and methods of calculating discount rates/cost of capital will vary.7. Translation of foreign financial statements for the convenience of domestic readers is fundamentally distinct from the translation of branch or subsidiary accounts for purposes of consolidation. In the latter case, translation involves a remeasurement process. In most countries, foreign accounts first are restated to the accounting principles of the parent country prior to restatement to parent currency. Convenience translations merely involve a restatement process in the sense that foreign accounts are multiplied by a constant to change the currency of denomination fro m domestic currency to the currency of the reader’s domicile.8. Rules of thumb can vary substantially from one country to another due to both accounting and non-accounting factors. Japan provides a striking example. Many Japanese companies are members of large trading groups (keiretsu) with large commercial banks at their core. Keiretsu often postpone interest and principal payments, so that long-term debt in Japan works more like equity in the United States. Short-term debt is attractive to Japanese companies because short-term obligations typically have lower interest rates than long-term obligations, and normally are renewed or “rolled over” rather than repaid. Thus, debt has a much different nature and purposein Japan than in the United States.The acid test ratio specifically involves cash, marketable securities and receivables as the numerator in the equation, and current liabilities as the denominator. But what counts as current liabilities versus long-term debt (or how long-term debt is viewed) is very different in Japan than in the U.S. In Japan, high short-term debt is less likely to indicate a lack of liquidity, for the reasons stated above. Banks often are willing to renew these loans because it allows them to adjust their interest rates to changing market conditions. Thus, short-term debt works like long-term debt elsewhere, and Japanese companies can operate successfully with a quick ratio at a level that would be entirely unacceptable in the United States. Note, however, that banking practices in Japan are changing rapidly, and the tolerance in Japan for high levels of debt financing may well decrease in the future.9. Important recommendations include the following:•Be aware that national differences in accounting measurement rules c an add “noise” to reported performance comparisons. The reader should be prepared to unwind accounting differences where necessary.•Use a structured approach, such as the one presented in this chapter, to ensure that all relevant factors are considered.•Cash flow-related measures are less affected by accounting principle differences than are earnings-based measures, thus making them potentially valuable in international analysis.•Audit quality varies dramatically across countries. Become familiar with the level of audit quality in a particular country before reaching conclusions using financialstatements prepared by companies in that country.•Corporate transparency also varies dramatically across countries. Be sure to assess accurately the quality of financial disclosures before reaching conclusions based on them.•Above all, appreciate that measurement and disclosure practices are environmentally based. Appreciation for institutional differences will greatly aid in proper interpretation of accounting based performance and risk measures.10. The following list describes in general fashion what probable effect the Dutch translation practice would have on selected financial ratios in comparison with the temporal method. The analysis assumes that the original financial statements of the two companies are identical in all respects save for the currency translation method used. Inventories are assumed to be carried at cost._________________________________ _______________________________________________ Devaluation ___ R evaluationCurrent ratio (liquidity) decrease increaseInv. At mkt goes downInv at mkt goes upDebt ratio (solvency) increase decreaseLoss goes in ATA so eq. smallerGain in ata eq lrg.Fixed asset turnover (efficiency) increase decreaseNet sales/assets assets smaller so inc.A ssets larger so dec.Return on assets (profitability) increase decreaseloss not in incomeGain not in incomeAs can be seen, the current rate method can have a significant effect on key financial indicators. Accordingly, security analysts must be careful to distinguish between the currency in which a foreign account is denominated and the currency in which it is measured.11. The attest function is what gives credibility to the financial statements. If this function is important in the domestic case, it is even more important internationally where statement readers are separated from the companies they are interested in not only by physical distance but also by cultural distance.12. Internal control is an activity performed by a firm’s int ernal auditors that helps to assure that management’s policies and procedures are being carried out effectively, that financial transactions are being properly reported both internally and externally and that the assets of the firm are safeguarded. Intern al control is relied upon by a firm’s external auditors in determining to what extent their work should replicate the work of the internal auditor. The role of the internal auditor has become even more important in assuring the reliability of management’s financial representations owing to the large number of financial scandals that has rocked the U.S. and other financial markets during the start of this decade. Recent legislation in the U.S., which is increasingly being emulated elsewhere, has made management responsible for assuring that their system of internal controls are not only in place but are working well. This has beennecessary to reduce investor uncertainty regarding the quality and reliability of a firm’s published financial accounts.In the absence of a strong system of internal controls, investors will adopt a more passive approach to investing as opposed to relying on firm-specific information. This involves taking a mutual fund approach to investing which attempts to diversify away information risk, although at the cost of lesser performance.Exercises1. The trend of dividends from a U.S. dollar perspective can be ascertained by translating the peso dividend stream using the $/P exchange rate prevailing at the beginning of the time series or the end. Use of the ending exchange rate provides the following trend data:20X6 ________ 20X7 ________ 20X8 ______Net income (P) 8,500 10,800 15,900Dividends (P mill’s)2,550 3,240 4.770Dividends ($000) 850 1,080 1,590Percentage change --- 27.1% 47.2%2.How the statement of cash flows appearing in Exhibit 9.5 was derived:Beg. Bal. DR. CR. End. Bal.Cash 2,400 3.990New fixed assets 8,500 (3) 2,695 (2) 555 10,640ST $ payable 500 500LT debt 4,800 (3) 1,584 6,384Capital stock 3,818 3,818Retained earnings 1,782 (1) 250 2,030Translation adjustment 1,898Sources Usesof ofFunds FundsSources:Net income (1) 250Depreciation (2) 555Increase in LT debt (3) 1,584Translation adjustment (4) 1,898Uses of funds:Increase in fixed assets (3) 2,6954,287 2,695Net increase in cash 1,5924,287 4,2873. Consolidated Funds Statement(figures appearing in parentheses denote changes due primarily to translation effects) Sources:Net income 250Depreciation 555Increase in LT debt 1,584 (1,584)Translation adjustment 1,898 (1,898)less intercompany payable 138Uses of funds:Increase in fixed assets 2,695 (2,695)Net increase in cash 1,590 (924) The $924 translation effect is that part of the $1,898 gain on the translation of net worth which is related to the translation of cash. It is derived as follows.a. Opening cash of 24,000 krona translated at .10 =$2,400Opening cash retranslated at 12/31 at .133 = 3,192Gain 792b. 6,000 krona increase in cash during the yearinitially translated at .111 =$6666,000 krona retranslated at 12/31 at .133 = 798Gain 132Total translation gain applicable to cash 9244. Yes, Infosys added value for its shareholders as its EVA was a positive RPE 1,540. Operating income more than covered the company’s cost of debt and equity.5. Debit: Cost of goods sold ¥250,000,000Taxes payable 87,500,000Credit Inventories ¥250,000,000Tax expense 87,500,0006. a.20X6 20X7 20X8Sales revenue (£) 23,500 28,650 33,160Sales revenue ($) 49,350 63,030 53,056b. Percentage change 20X7/20X6 20X8/20X7Pounds 21.9% 15.7%Dollars 27.8% -15.8%The two time series do not move in parallel fashion because of changes in exchange rates used to perform the convenience translations.c. This problem can be minimized by translating the time series using the 20X6 exchange rate or by using the 20X8 exchange rate. Trend analysis can also be performed in the local currency.7. a. ROE (per Swedish GAAP) = 4,709/88,338 = 5.3%ROE (per U.S. GAAP) = 3,127/84,761 = 3.7%b. Some students will favor using the ROE based on Swedish GAAP, especially if Volvo’sperformance is being compared with that of another company in Sweden. Others willfavor basing their performance assessment on ROE per U.S. GAAP, especially if Volvois being compared to a U.S. counterpart. The latter at least minimizes the apples tooranges issue. It is not clear which viewpoint is correct, and this question should provoke good discussion of the value of restated accounting numbers.c. Even if students all agreed that an ROE based on U.S. GAAP were preferable, the user ofthis information should take into account all institutional considerations, such asdifferences in tax laws, financial norms and business practices that affect all ratios in the Swedish business environment. In the absence of such analysis, restated ratios are likely to be misinterpreted.8. Assessing reasons for P/E ratio trends and cross-country comparisons is difficult. Thetext discusses two studies that have analyzed differences in P/E ratios between Japan and the United States in the late 1980s. The studies differ greatly in their explanations of the(then) much higher Japanese P/E ratios, and neither study claims to explain more than apart of the difference. Part but not all of the reasons were attributable to accountingmeasurement differences. We suspect that differences in institutional factors probablyexert the dominant reason for observed differences internationally.9. Students answers will naturally vary. However, they should recognize that audit practiceare influenced as much by differences in social, economic and political environments as are measurement standards. They should also recognize that standard setting is as mucha political process as it is a process of logic or sound principles.10. Judging from information provided in Exhibit 9-22, liability cases vary far more bycountry than by auditor – with 35 cases in the U,.S., over twice as many as in the nexthighest country (the U.K., with 17). No audit firms had cases in every country, and thetotal number for each auditor is relatively similar, ranging from 11 (Arthur Andersen) to18 (KPMG). The country where liability cases were least frequent was the Netherlands,with only one case.Why? Laws and regulations in the Anglo-American countries, including the UnitedStates, stress investor protection. This places more liability on the auditor and makes iteasier for companies or shareholders to bring or prove a suit. In response to the threat of litigation, auditors are probably more careful in the United States, and more willing tosubject themselves to strict regulations.Implications? It is reasonable to argue that financial reporting quality is positivelycorrelated with frequency of audit litigation. For example, the patterns of auditorlitigation shown in the table above are consistent with the relatively high financialreporting quality found in the U.S., the U.K., Australia and Canada.11. Student opinions are likely to vary on this one as well. Some will argue for opinionscoined by private professional bodies. Others, in light of Enron, et. al., will opt for more legal opinions. In the end, students should conclude that enforcement mechanisms arealso very important. Recent U.S. indictments of company officers for accountingviolations as well as mandated prison terms is unprecedented. Together with increasing recourse to the courts by aggrieved investors, the imbalance between an auditor’sresponsibility and authority is being redressed.12. Reasonable criteria for judging the merits of a database for company research include(but are not limited to):-coverage (number of companies, countries, years of data).-amount of information for each company (number of financial, market-based measures per company).-reliability, ease of use, language translations, search features.-cost (a re only some of the data “freely available?”).-access and links to other Web sites provided?Case 9-1Sandvik1.a. There are several advantages that accrue to Swedish firms employing the system of special reserves. First, political dividends accrue to firms that align their goals with those of the government. Second, there are tax advantages as expenses recognized in establishing a reserve are tax deductible. Third, the use of reserving allows companies to manage their earnings. Disadvantages include the risk of reducing a company’s reporting credibility with the international investing community. This, in turn, may limit the company’s external financing flexibility.2. The government benefits from the reserving system in that it has ally in maintaining full employment. That is to say, its macroeconomic tool kit is expanded in that it yet another vehicle for managing the economy in addition to monetary and fiscal policy.3. The use of reserves makes it difficult for statement readers who are unfamiliar with Swedish reporting practices to assess the risk and return attributes of the firm. For example, it will not be clear to what extent observed differences in financial ratios between a Swedishcompany and a non-Swedish company are due to accounting differences as opposed to real economic differences in the attributes being measured.4. The use of reserves had a dampening effect on Sandvik’s reported earnings.5. The entries used to increase the reserves can be determined by examining the change in Untaxed Reserves in the balance sheet as well as examining the relevant notes to the financial statements. The entries were:Depreciation expense 172Excess depreciation reserve 172Other expenses 13Other untaxed reserves 136. With reserves Without reservesROS 3,731/15,242 3,731 + 185(1-.03)/15,242= 24.5% = 25.7%ROA 3,731 + 1 + 633 3,731 + 1 + 633 + 185(38,142 + 22,286)/ 2 [(38,142 – 185) + (22,286 + 85)] /2= 14.4% = 15.1%Case 9-2Continental A.G.Students will first gravitate to the notes to the financial statements dealing with Special Reserves and Provisions. Their instincts are correct. The problem facing an external analyst is that it is difficult to determine which of the reserve and provision items are legitimate and which are not. It turns out that two important keys to this case are to be found in footnotes 21 and 22. Focusing on the consolidated figures, we see that Continental is using entries under Other operating income and Other operating expenses to smooth reported earnings. The following analysis backs out 1) Credit to income from the reversal of provisions, 2) Credit to income from the reduction of the general bad debt reserve, and 3) Credit to income from the reversal of special reserves appearing in note 21 and Allocation to special reserves under note 22.Adjustments:19X9Operating income DM68,029Provisions DM33,559General B/D Reserve 2,014Special reserve 32,456Special reserves 1,278Operating income 1,27820X0Operating income DM57,237Provisions DM17,312General B/D Reserves 1,101Special Reserves 38,824Special Reserves 168Operating income 168To determine the net overstatement on an after-tax basis, the students should attempt to approximate Continental’s effective tax rate. Information to do this are contained in footnote 24 and Continental’s income statement.Effective Taxes: 19X9 20X0Income tax 141,476 59,884Income after tax 227,838 93,435Income before tax 369,314 153,319Effective rate: 141,476/369,314 59,884/153,319= 39% = 39%Reduction in taxes:66,751 X .39 57,069 X .39= 26,033 = 22,257Net overstatement:66,751 57,069-26,033 -22,25740,718 34,812This overstatement, as a percentage of reported consolidated earnings, was 18% for 19X9and 37% for 20X0. Dietrich and Marissa have cau se to pay Continental’s CFO a visit.。
企业集团HKUST
2.3
1.4
1.8
4.5 Mitsubishi
Corp.
Mitsubishi 2.0
Heavy Industries
6.1
3.6
e.g., Four Major Mitsubishi Group Firms
3.1
1.6
8 Horizontal Keiretsu
Group
三菱 Mitsubishi
三井 Mitsui
Business Groups
Business groups similar in form to conglomerates
Conglomerates out of favor in many countries?
Business groups in many other countries found to be associated with higher performance.
Some form of common administration and control across businesses in a business group
– weaker in case of keiretsu in Japan – stronger in case of family-centered industrial groups in India
subsidiaries in 73 locations overseas
Leverage on the group’s reputation => reduce image building cost
Different services under one roof => Larger business opportunities
日本财阀系列企业体系Keiretsu历史背景和面临问题样本
Question One：Compare the post-war Keiretsu inter-firm structure in Japan with the pre-war Zaibatsus. Explain the reasons w hy the Keiretsu were important to Japan’s economy in the 1950-1990 period，and why they are now considered to be a major cause of its current structural problems.IntroductionThis paper reviews major theoretical and empirical work on comparing the Keiretsu and Zaibatsus as well as the importance of Keiretsus in the process of Japan development during the 1950s to early 1990s. Firstly，I compare the pre-war Zaibatsus with the post-war Keiretsu in concepts，history，structures and governance perspectives. This article will reviews major theoretical and empirical work on vertical and horizontal Japanese keiretsu. I then discuss changes in the Japanese economy during the post-war period from 1950s till 1992 Japanese economic decline and their implications for the persistence and continued benefits of each form of inter-corporate grouping followed by a discussion of facts regarding the role of keiretsu in the Japanese economy. Thirdly，this article will analyse the structural problems of Keiretsus on the globalisation context.Backgrounds of Zaibatsus and Keiretsus in JapanJapanese Zaibatsus developed mostly from the Meiji era (1868-1912). By the turn of the century，Japan had given birth to several groups of widely diversified companies，each of them owned and operated by a single family. With the wealth expansion of these families，they became the nation’s new aristocracy，the “financial cliques” or t he Zaibatsus. The Zaibatsu is generally understood to be a diverse group of large industries controlled by a single family，usually through a central holding company.According to Miyashita and Russell (1994)，a Zaibatsu is “nothing more than a large industr ial combine” on its initial strcuture. The actual growth of the Zaibatsus began in 1914，World WarⅠ，Japan supplied munitions and other goods to the Allies. Without the competition from European companies，Japanese firms were free to expand internationally. During that five years，the export of Japan increased 266%. The Big Four----Zaibatsus are Mitsui，Sumitomo，Mitsubishi and Yasuda used their profits to start their own bank. The Americans initially wanted to dissolve all the zaibatsu after World WarⅡ，as they saw them as undemocratic and the finance behind the militaristic government of the 1930's (see ).Even though Japan's economy made huge strides in economic reformation after the WWⅠ，the Zaibatsu interests began to enter the political arena to support their interests. Their activities became entwined with the government in wartime Japan. Eventually，the Potsdam Declaration that was signed in 1945 required the liquidation of the Zaibatsu to democratize Japan's post–war economy. As explained in the previous article，by 1945 the zaibatsu had grown to control a significant portion of Japanese trade and industry. In addition，for the purpose of controlling economic power，special provisions were included in Japan's Antimonopoly Act for the specific purpose of forbidding holding companies and limiting the acquisition by financial enterprises of stock of other companies. In hindsight these provisions might appear to have been ineffective barriers to the creation of excessive economic control and equally ineffective as measures to ensure competition in Japan's economy. These arguments were made when Japan enacted the Act for partial Amendment of the Antimonopoly Act in 1997 by which act Japan finally eliminated the 50–year old ban on holding companies.Compare pre-war Zaibatsus with the post-war KeiretsusThe zaibatsu is a diversified group of businesses owned by a family. Mostly had origins in non-manufacturing sectors in mining，shipping and most importantly，banking. Then diversified not by integration but by shareholdings and representatives on Boards of Directors of separate firms. The Keiretsus are conglomerates similar to pre-war Zaibatsus but not family owned and with a bank at its heart and with one of the following forms (Miwa，):1. General trading company able to handle gigantic and diverse volume of commerce2. Production oriented group3. Distribution oriented group based on network of small retailers4. Large retail or RR companiesWithin years of dismantling the Zaibatsu，changes on both the domestic and international fronts are thought to have led to a relaxation of regulations upon the concentration of economic power in Japan. On the latter front，following the establishment of communist China，U.S. foreign policy toward Japan could be seen shifting to one supporting a shoring up of Japan's economic power. Secondly，industrial growth and increased production capacity in Japan supported the U.S. need for supplies during the Korean War. Under this circumstance，the Ministry of International Trade and Industry (MITI) helped Zaibatsus to reform with personnel and new organizational structure. The personnel system including dispatching senior managers form main banks and sogo shosha to smaller firms aims to tight the horizontal connections in order to keep a controlled decision making process. Keiretsus include horizontal and vertical company relationships，and sometimes business ties that are held together not by capital but by mere transactionalrelationships among enterprises. The central role of main banks in corporate governance greatly distinguishes these groups from the Zaibatsus.Viewing this development from Zaibatsu the Keiretsu as a whole，the following two points seen characteristic. First，in the pre-war Zaibatsu the links in the enterprise groups were centred on the commercial sector of their businesses. On the contrast，the post-war Keiretsus were paying attentions on heavy and chemical industry sector. Second，the Zaibatsus linked vertically and topped by a holding family for the whole group. By comparison，the Keiretsus are centred on financial institutions (main banks) and linked the enterprises horizontally with newly formed enterprise groups.PEST analysis on the importance of Keiretsus in Japan’s post-war developmentPolitical：Competitions among countries had a great impact on the development of Japan. The government set the industrial structure of the country with high-standard processing trade (Russell，1994). Keiretsus’ horizontal networks can be a competitive advantage due to the networks can supervise the whole process from manufacturing to retailing. With the assistance of sogo shosha’s entry to certain country-wide markets，Japan can easily sustain this “input-output synergies” competitive advantage.The Mitsui China Representative office vice president Wei of once mentioned in an interview “We won’t manufacture illegal things，but we are able to manufacture anything else with the Keiretsu networks.”( see ).Economical：During the 1950s to 1990s，Japan experienced three depressions：the oil price increased in the 1970s made the GDP growth rate in Japan came to a negative growth in 1974 (see ). The Plaza Accord indirectly let to the bubble economy in Japan. Faced a relatively unfavourable domestic economical context，thecompetitive advantage of Keiretsus including the Big Six and other firms are making efforts to strengthen their own groups，and at the frontiers of the new industries which have been developed in Japan since the war，they have been competing against one another with out quarter in equipment investment. This is not only in the case of oil-chemicals industry but also in the motor vehicles. Nine manufacturers in addition to Toyota and Nissan are competing to increase their shares in the market. In this case，Japan’s productive potential has risen rapidly a nd has realized a degree of high growth which is literally the highest In the world.Apart from external competitive advantages，the internal financial networks also made a great contribution to the rapid growth of Keiretsus and in return to the whole Japan economy. The input-output synergies made the profit-trapping possible. What’s more，the main bank financing and cross-shareholding promoted the capital market of Japan developed fast as well as way to maintain anti-takeover and encouraging risk taking situation.Social and technological：The labour force assessment of Keiretsus can be identified as follow，until quite recently，a continual supply of superior labour of both with good quality and readily adaptable to modern technology was available. Additionally，the Keiretsus’ tendency to invest was never subject to restriction from this aspect. The new personnel rotation and loan of personnel system make sure the connection between banks and firms. This system enable the banks to supervise the debts and operations of the firms. As for the firms，they may obtain the essential financial supports and advanced management.In sum，the situation of Japan post-war economy growth was owing to the network structural protection and development. These Keiretsus made efforts in equipmentinvestment，intending to get practically all new industries into their hands on the basis of funds collected from the pipelines of the powerful financial Keiretsus，so that they might strengthen their control of the industries.The changing global contextThe bursting of Japan’s ‘‘bubble economy’’ led to an economic downturn in the 1990s. Because of deflation，decreasing consumer demand，stagnation of real GDP，a fall in property and land prices by 80% between 1991 and 1998 as well as a rapid growth of unemployment. Widespread changes in capital markets and inter-firm networks in Japan were accompanied by more fundamental restructurings of corporate performance systems，labour relations and employment practices. Competition from cheaper imports increased at the same time as domestic demand fell overall. As a result there were unprecedented declines in Japan’s overall industrial production rate in 1997 and 1998. The keiretsu system remained strongly in place throughout the first half of the 1990s. Nevertheless，the tendency move toward globalization of capital markets in Japan and ongoing regulatory change may potentially impact networking and performance implications in the 21st century.These keiretsu are an effective system of minimising transaction costs，and an efficiency gain that has contributed to Japan's economic success. But the system has often been criticised for excluding outside firms from markets and，more particularly，as a barrier to foreign firms entering the Japanese market. Although keiretsu relationships appeared in the 1930s，it was in the 1950s that they were rapidly consolidated. In the post-war years，larger corporations chose their trading partners in areas such as production and distribution，and set about forming close，long-term business relationships. The keiretsu were a response to the intense competitivepressures which existed among Japanese firms；certainly，their primary purpose was not to exclude foreign firms. The keiretsu system resulted from corporate competition within the Japanese economy，and became established as a link between firms that was economically rational，and suited to Japanese-style management. However，the system of keiretsu relationships began to be seen as an unfair barrier.With the process of globalisation，plentiful cheap capital from the group's own banks financed a wild dash for global market share in the fast-moving global markets. It is hurting the keiretsu：When the world moved on to Microsoft Corp. and Intel Corp. of the computer technology. These competitions are costing the keiretsu plenty. ''This is not a temporary change due to the recession,'' says Hiroshi Okumura，a Chuo University professor who studies the keiretsu. ''These groups have become weak because of a structural change in the economy.'' (Business week，1999).Over the last decade，many of the keiretsu car manufacturers of Japan have experienced a huge shift in their external environment. Some of the major drivers of change include the sustained economic slowdown in Japan，an increasingly globalized world and changing customer-supplier relationships. These changes have forced keiretsus to reinvent themselves and，in some cases，to completely dissolve the traditional keiretsu structure. As globalization continues to progress，it has become clear that Japanese firms will have to start shifting their productions centers in order to stay competitive. This will be difficult for many Japanese firms due to the fact that interacting with other non-keiretsu companies will require learning a different business culture. Shedding the less desirable qualities of Keiretsu has allowed many Japanese firm flourish on the world stage. By looking outside of their own keiretsu group，firms are establishing international manufacturing agreements with moreindependent firms who are able to produce products for much less then in Japan. Some of the standout Japanese companies that have reach out to foreign suppliers and manufacturers is Toyota. While most of Japan was going through the lost decade，Toyota was actively establishing new partnerships with western firms in both the Americas and Europe. Not only was Toyota unafraid of reaching out to new markets and business partners，it made maintained diversified supply chains and manufacturing locations as to maximize profits and competitiveness.According to the report from Japan National Statistic institution，the cross-shareholding rate of the Keiretsus dropped from 93% in 1987 to 83% in . Diversification without regard for return on equity has been costly in terms of lower credit ratings. The conservatism of the Keiretsu has caused them to lag behind in fast-changing，globalised markets. As the executive vice-president of Mistubishi Research Institute，Danno Koichi，noted in a recent paper (see )，the competition brought about by the expansion of US companies，the integration of the Western European market，the birth of the euro，and the information-technology revolution has hit Japanese companies hard.Structural reforms being undertaken by the Japanese government may change the country's corporate landscape，while moves by more companies to seek alliances outside their Keiretsu-- as Mistubishi Oil and Nikko Securities of the Mistubishi family did -- may well hasten the deconstruction of these corporate entities. ConclusionThis paper reviews major theoretical and empirical work on comparing the Keiretsu and Zaibatsus as well as the importance of Keiretsus in the process of Japandevelopment during the 1950s to early 1990s. Firstly，by comparing the pre-war Zaibatsus with the post-war Keiretsu in concepts，history and structures，we conclude that the Keiretsus are the reorganised Zaibatsus. Keiretsu are the close，long-term business relationships established by large corporations with select groups of smaller firms，and they are linked through investment and the exchange of personnel. Then this article offered a discussion of the growth in the Japanese economy during the post-war period from 1950s till 1992 contributed by the Keiretsus’ networks. Thirdly，in the globalisation context，the Keiretsus are regarded as having structural problems. These problems limit the sustainable competitive advantages of Keiretsus to develop into the global market. So the changes are on the process for a reforming of Japan economy.ReferencesAnon 'TIME TO OVERHAUL JAPAN'S KEIRETSU MODEL' (1999)，BusinessWeek，3620，p. 114Bremner，B，Thornton，E，& Kunii，I (1999)，'FALL OF A KEIRETSU'，BusinessWeek，3620，pp. 86-92Kawai，N. (，Spring Issue 85). Shifting Gears. J@pan Inc. ，pp. 10-12 McGuire，J，& Dow，S ()，'The persistence and implications of Japanese keiretsu organization'，Journal of International Business Studies，34，4，pp. 374-388 Miwa，Y，& Ramseyer，J ()，'Does Ownership Matter?Evidence from the Zaibatsu Dissolution Program'，Journal of Economics & Management Strategy，12，1，pp. 67-89，Business Source Premier，EBSCO host，viewed 5 May . Miyashita，K. and Russell，D. (1994)，Keiretsu：Inside the Hidden Japanese Conglomerates McGraw-Hill，Inc.Shimotani，M (1995)，'The Formation of Distribution Keiretsu：The Case of Matsushita Electric'，Business History，37，2，pp. 54-69，Business Source Premier，EBSCO host，viewed 1 May'The Japanese Zaibatsu' (1946)，Vital Speeches of the Day，12，13，p. 394，Business Source Premier，EBSCO host，viewed 5 May .Tong，A，& Richardson，J ()，'The rise--and fall?--of the keiretsu'，Asian ChemicalNews，9，385，p. 14。
Japan
Japan (日本Nihon or Nippon, officially 日本国Nippon-koku or Nihon-koku) is an island country in East Asia. Located in the Pacific Ocean, it lies to the east of the Sea of Japan, People's Republic of China, North Korea, South Korea and Russia, stretching from the Sea of Okhotsk in the north to the East China Sea and Taiwan in the south. The characters which make up Japan's name mean "sun-origin", which is why Japan is sometimes identified as the "Land of the Rising Sun".Japan is comprised of over 3,000 islands[5] making it an archipelago. The largest islands are Honshū, Hokkaidō, Kyūshū and Shikoku, together accounting for 97% of Japan's land area. Most of the islands are mountainous, many volcanic; for example, Japan’s highest peak, Mount Fuji, is a volcano. Japan has the world's tenth largest population, with about 128 million people. The Greater Tokyo Area, which includes the de facto capital city of Tokyo and several surrounding prefectures, is the largest metropolitan area in the world, with over 30 million residents.Archaeological research indicates that people were living on the islands of Japan as early as the Upper Paleolithic period. The first written mention of Japan begins with brief appearances in Chinese history texts from the first century A.D. Influence from the outside world followed by long periods of isolation has characterized Japan's history. Since adopting its constitution in 1947, Japan has maintained a unitary constitutional monarchy with an emperor and an elected parliament, the Diet.Japan is a country of over three thousand islands extending along the Pacific coast of Asia. The main islands, running from north to south, are Hokkaidō, Honshū (the main island), Shikoku and Kyūshū. The Ryukyu Islands, including Okinawa, are a chain of is lands south of Kyushū. Together they are often known as the Japanese Archipelago.About 70% to 80% of the country is forested, mountainous,[39][40] and unsuitable for agricultural, industrial, or residential use. This is because of the generally steep elevations, climate and risk of landslides caused by earthquakes, soft ground and heavy rain. This has resulted in an extremely high population density in the habitable zones that are mainly located in coastal areas. Japan is one of the most densely populated countries in the world.[41]Its location on the Pacific Ring of Fire, at the juncture of three tectonic plates, gives Japan frequent low-intensity tremors and occasional volcanic activity. Destructive earthquakes, often resulting in tsunamis, occur several times eachcentury.[42] The most recent major quakes are the 2004 Chūetsu earthquake and the Great Hanshin Earthquake of 1995. Hot springs are numerous and have been developed as resorts.[43]The climate of Japan is predominantly temperate, but varies greatly from north to south.[44] Japan's geographical features divide it into six principal climatic zones:Hokkaidō: The northernmost zone has a temperate climate with long, cold winters and cool summers. Precipitation is not heavy, but the islands usually develop deep snow banks in the winter.Sea of Japan: On Honshū's west coast, the northwest wind in the wintertime brings heavy snowfall. In the summer, the region is cooler than the Pacific area, though it sometimes experiences extremely hot temperatures, because of the foehn wind phenomenon.Central Highland: A typical inland climate, with large temperature differences between summer and winter, and between day and night. Precipitation is light. Seto Inland Sea: The mountains of the Chūgoku and Shiko ku regions shelter the region from the seasonal winds, bringing mild weather throughout the year. Pacific Ocean: The east coast experiences cold winters with little snowfall and hot, humid summers because of the southeast seasonal wind.Ryukyu Islands: The Ryukyu Islands have a subtropical climate, with warm winters and hot summers. Precipitation is very heavy, especially during the rainy season. Typhoons are common.The highest temperature ever measured in Japan — 40.9 degrees Celsius —was recorded on August 16, 2007.[45]The main rainy season begins in early May in Okinawa, and the stationary rain front responsible for this gradually works its way north until it dissipates in northern Japan before reaching Hokkai dō in late July. In most of Honshū, the rainy season begins before the middle of June and lasts about six weeks. In late summer and early autumn, typhoons often bring heavy rain.[44]Japan is home to nine forest ecoregions which reflect the climate and geography of the islands. They range from subtropical moist broadleaf forests in the Ryūkyū and Bonin islands, to temperate broadleaf and mixed forests in the mild climate regions of the main islands, to temperate coniferous forests in the cold, winter portions of the northern islands.[46]From 1868, Meiji period launched economic expansion. Meiji rulers embraced the concept of a free market economy and adopted British and North American forms of free enterprise capitalism. Japanese went to study overseas andWestern scholars were hired to teach in Japan. Many of today's enterprises were founded at the time. Japan emerged as the most developed nation in Asia.From the 1960s to the 1980s, overall real economic growth has been called a "Japanese miracle": a 10% average in the 1960s, a 5% average in the 1970s and a 4% average in the 1980s.[53] Growth slowed markedly in the 1990s, largely because of the after-effects of Japanese asset price bubble and domestic policies intended to wring speculative excesses from the stock and real estate markets. Government efforts to revive economic growth met with little success and were further hampered by the global slowdown in 2000.[54] The economy showed strong signs of recovery after 2005. GDP growth for that year was 2.8%, with an annualized fourth quarter expansion of 5.5%, surpassing the growth rates of the US and European Union during the same period.[55]The Minato Mirai 21 district of Yokohama. The majority of Japan's economy is service sector based.Japan is the second largest economy in the world,[56] after the United States, at around US$4.5 trillion in terms of nominal GDP[56] and third after the United States and China in terms of purchasing power parity.[57] Banking, insurance, real estate, retailing, transportation, telecommunications and construction are all major industries.[58] Japan has a large industrial capacity and is home to some of the largest, leading and most technologically advanced producers of motor vehicles, electronic equipment, machine tools, steel and nonferrous metals, ships, chemicals, textiles and processed foods.[54] The service sector accounts for three quarters of the gross domestic product.As of 2001, Japan's shrinking labor force consisted of some 67 million workers.[59] Japan has a low unemployment rate, around 4%. Japan's GDP per hour worked is the world's 19th highest as of 2007.[60] Big Mac Index shows that Japanese workers get the highest salary per hour in the world. Some of the largest enterprises in Japan include Toyota Motor, NTT DoCoMo, Canon, Honda, Takeda Pharmaceutical, Sony, Nintendo, Nippon Steel, Tepco, Mitsubishi Estate, and 711.[61] It is home to some of the world's largest banks and the Tokyo Stock Exchange, known for Nikkei 225, stands as the second largest in the world by market capitalization.[62] Japan is home to 326 companies from the Forbes Global 2000 or 16.3% (as of 2006).Nagoya has high industrial power like automative industry.Japan ranks 12th of 178 countries in the Ease of Doing Business Index 2008 and it has one of the smallest governments in the developed world. Japanese variant of capitalism has many distinct features. Keiretsu enterprises are influential. Lifetime employment and seniority-based career advancement are relatively common in Japanese work environment.[63][64] Japanese companies are known for management methods such as "The Toyota Way". Shareholder activism is rare.[65] Recently, Japan has moved away from some of these norms.[66][67] In the Index of Economic Freedom, Japan is the 5th most laissez-faire of 30 Asian countries.[68]Japan's exports amounted to 4,210 U.S. dollars per capita in 2005. Japan's main export markets are the United States 22.8%, the European Union 14.5%, China 14.3%, South Korea 7.8%, Taiwan 6.8% and Hong Kong 5.6% (for 2006). Japan's main exports are transportation equipment, motor vehicles, electronics, electrical machinery and chemicals.[54] Japan's main import markets are China 20.5%, U.S. 12.0%, the European Union 10.3%, Saudi Arabia 6.4%, UAE 5.5%, Australia 4.8%, South Korea 4.7% and Indonesia 4.2% (for 2006). Japan's main imports are machinery and equipment, fossil fuels, foodstuffs (in particular beef), chemicals, textiles and raw materials for its industries.[69] By market share measures, domestic markets are the least open of any OECD country.[64] Junichiro Koizumi administration commenced some pro-competition reforms and foreign investment in Japan has soared recently.[70]Japan's business culture has many indigenous concepts such as nemawashi, nenko system, salaryman, and office lady. Japan's housing market is characterized by limited land supply in urban areas. This is particularly true for Tokyo, the world's largest urban agglomeration GDP. More than half of Japanese live in suburbs or more rural areas, where detached houses are the dominant housing type. Agricultural businesses in Japan often utilize a system of terrace farming and crop yields are high. 13% of Japan's land is cultivated. Japan accounts for nearly 15% of the global fish catch, second only to China.[54] Japan's agricultural sector is protected at high cost.[71]Japanese culture has evolved greatly over the years, from the country's original Jōmon culture to its contemporary culture, which combines influences from Asia, Europe and North America. Traditional Japanese arts include crafts (ikebana, origami, ukiyo-e, dolls, lacquerware, pottery), performances (bunraku, dance, kabuki, n oh, rakugo), traditions (games, tea ceremony, Budō, architecture, gardens, swords) and cuisine. The fusion of traditional woodblockprinting and Western art led to the creation of manga, a typically Japanese comic book format that is now popular within and outside Japan.[108]Manga-influenced animation for television and film is called anime.Japanese-made video game consoles have prospered since the 1980s.[109]Japanese music is eclectic, having borrowed instruments, scales and styles from neighboring cultures. Many instruments, such as the koto, were introduced in the ninth and tenth centuries. The accompanied recitative of the Noh drama dates from the fourteenth century and the popular folk music, with the guitar-like shamisen, from the sixteenth.[110] Western music, introduced in the late nineteenth century, now forms an integral part of the culture. Post-war Japan has been heavily influenced by American and European modern music, which has led to the evolution of popular band music called J-pop.[111]Karaoke is the most widely practiced cultural activity. A November 1993 survey by the Cultural Affairs Agency found that more Japanese had sung karaoke that year than had participated。
A Flowchart Approach to Asia's Industrial Cluster Policy
A Flowchart Approach to Asia’s Industrial Cluster PolicyAkifumi Kuchiki1. IntroductionPolicy for forming an industrial cluster, or industrial cluster policy, plays an important role in developing a region in East Asia. Industrial cluster policy is followed not only in Japan by the Ministry of Economy, Trade, and Industry, but also in most countries in East Asia such as Malaysia and Singapore. Silicon Valley in the US and Bangalore in India are well-known success stories of development in information technology. Agglomeration theory and cluster theory explain that an industrial cluster is effective in generating external economies and reducing transportation costs. But it is necessary that we should make it clear what are the required conditions for f o rming a cluster particularly in developing countries when discussing growth strategy.Porter (1998) paid attention to industrial cluster policy as growth strategy. According to Fujita and Thisse (2002), central issues of spatial economics are to explain mechanisms for forming an agglomeration and linking an industrial agglomeration to innovations. Porter (1998) considered that the latter is more important than the former and examined how an i ndustrial cluster brought innovations by using his diamond approach in cluster theory.There are two kinds of explanation of the former mechanism of forming an agglomeration: one is what factors form an agglomeration and the other is which equilibrium becomes a core industrial agglomeration under certain conditions in the case of multiple equilibria. The latter case of equilibrium theory is mathematically easy to analyze and we can find the equilibrium analysis of urban agglomeration in Nishikimi and Hamaguchi (1997).Many papers such as Sonobe and Kawakami (2001) explained industrial agglomeration in a country by econometric methods. Kuchiki (2003) found that conditions of forming new clusters in northern Vietnam were (a) industrial zones, (b) capacity building of physical infrastructure and institutional reform s in investment procedures, (c) anchor firms in the manufacturing industry, showing that industrial zones together with the combination of infrastructure and institutions played a crucial role in an industrial agglomeration and that Sogoshosha of Japanese tradingcorporations played an important role in inviting Japanese manufacturing firms to the industrial zones. The anchor firm of the cluster Canon, a Japanese firm, exported its products. We called this case the Canon effect. This paper will generalize the typical pattern of forming industrial agglomerations in East Asia by illustrating another case.The purpose of this paper is to build a framework to analyze industrial cluster policy. The framework is a flowchart to apply to analyses of regions from the point of industrial cluster policy. We will make it clear what factors are crucial in forming an industrial cluster. We will take into account value chain management of multinational firms to deploy plants. Governments and multinational firms are players in the economy to discuss industrial cluster policy. Governments take industrial cluster policy while multinational firms take value chain management. So that industrial cluster policy should be consistent with value chain management. We will show how we agglomerate firms by taking a flowchart approach to industrial cluster policy.The method of this paper is to study the case of Toyota’s investment in Tianjin, China. Toyota adopted cross dock logistics to supply components from Shanghai to Tianjin to attain local content of 80%. Its transportation costs depend on cross dock logistics. We will also refer to Kuchiki (2003) which discussed roles of industrial zones in forming industrial clusters in East Asia since 1986. We propose a simple calculation method to find the critical factors needed to form an industrial cluster. We will consider variables in transportation costs, external effects of agglomeration, costs of building a new plant, and scale economies.We conclude that the three factors of (a) industrial zones, (b) capacity building, and (c) anchor firms are the key to forming industrial clusters in implementing industrial cluster policy by examining Toyota’s cluster in Tianjin. Capacity building functions by combining facilitation of physical infrastructure, institutional reform, human resource development, and preparation of living conditions. Institutional reform includes one stop service and deregulation on investment procedures. Toyota’s cluster is not the same as that of Canon’s cluster in northern Vietnam in procuring components. ‘Cross dock logistics’ of the Just-In-Time system of Toyota contributes to value chain management to deter from forming an industrial cluster. We found the following t wo factors had positive effects in forming an industrial cluster: ‘Keiretsu’ relationship between an anchor firm and its related firms, and scale economies.We have three stages to form an industrial cluster as follows: Step I: An anchor firm moves into an industrial zone if conditions on (a) the industrial zone and (b) capacity building hold; Step II: Its related firms move into the industrial zone given the minimum requirement that the anchor firm attains production size of scale economies hold. It is noted that an industrial zone is not enough to invite an anchor firm without capacity building and that infrastructure is not enough to satisfy the condition of capacity without institutional reform.We summarize this process in Figure 4-1 of a flowchart. Sometimes an anchor firmand its related firms make decisions at the same time. We do not need a flowchart in these cases. At other times the related firms do not follow the anchor firm’s decision and firms do not agglomerate. These are the cases where our flowchart approach is needed to give priority to measures of indu strial cluster policy. The flowchart is crucial to success in the policy implementation since budgets are limited. We need an action plan to implement the flowchart.The flowchart approach of Kuchiki (2003) was applied to evaluate a project of Japan Bank f or International Cooperation in northern Vietnam (see JBIC (2004)). Our flowchart approach is practical and can be applied to developing countries as growth strategy by checking whether conditions of (a), (b), (c), and (d) are sufficient to invite anchor firms and their related firms.Section 2 explains how a firm deploys plants according to value chain management. Section 3 presents a flowchart approach in forming an industrial cluster and examines what conditions are critical to forming an industrial cluster. Section 4 is a case study of Toyota’s investment in Tianjin, China. A procurement process is part of value chain management of Toyota and cross dock logistics has negative effects on forming the industrial cluster. Next we will focus on decision making of a component firm. Section 5 shows that Denso is a Keiretsu firm that is related to Toyota to supply components. We will analyze Denso’s behavior in detail.This paper is a case study of Toyota’s cluster in Tianjin and tries to generalize a pattern for forming a cluster. We will build a prototype model of a flowchart approach to industrial cluster policy but the prototype model has many variations. It is noted that more cases are needed to justify the generalization by studying various types of industrial cluster policies. Flowcharts of biotechnology clusters and information technology clusters may be different from those of industrial clusters in the electronics and automobile industries.2. Value Chain ManagementThis section explains how a firm deploys a plant from the point of value chain management according to our interpretation of value chain management as seen in Porter (1998).2.1. Value ChainPrivate companies cannot survive without competitive advantages under free competition. Value chain management and the establishment of core-competence can attain a competitive advantage. We will explain the mechanism below by Figures 4-2, 4-3, 4-4, 4-5 and 4-6.As shown in Figure 4-2, a value chain is a whole process of research and development, design, procurement of parts and components, assembly, and marketing including aftercare-service in order to generate value for customers.Production functions in economics focus on assembly and production. The objective of private companies is to maximize profit based on production functions. But Figure 4-2 shows that the maximization is based on the value chain of the whole process of design, procurement, assembly, and marketing. The solution is different from that of only production in textbook economics shown in Figure 4-3.Figure 4-4 makes clear that the optimization of a value chain is to maximize competitive advantage for customers’ satisfaction as we explain below. This is different from the Japanese characteristic of product-out. Producers are satisfied that their product made by its particular characteristics is of the best quality. As shown in Figure 4-5, it is not always the optimal case that only one company takes part in the whole process. US multinational corporations use take strategies of merger and acquisition, alliances, and outsourcing. That is why they have advantages in cost performance over Japanese companies.A company that has a competitive advantage in the long run must have a core-competence as part of its value chain. A company cannot ha ve competitive advantages over the whole value chain, and must select a core-competence and focus on it.Examples of value chains are games, television broadcasting, and character goods in the case of sports, movies, theme parks, and musical shows in the c ase of Walt Disney. These are classified as entertainment businesses.Here we summarize that the definition of a value chain is as follows:Design & Plan--> Procurements of Parts & Components --> Assemble --> Marketing (Logistics & Aftercare-Service).Strategies for value chain management are as we mentioned above: (1) Outsourcing, (2) M&A (mergers & acquisition s), and (3) alliances. IBM puts an emphasis on marketing and R&D in its value chain. Ford and GM started an Internet business for marketing from th e main process of assembly and production (See Figure 4-6). Sony is interested in financial sectors including banking and insurance. Japanese automobile company Nissan merged with French automaker, Renault. A French manager, who changed the Japanese subcon tracting system, and its employment systems, makes important decisions. A merger of Zaibatsu, between Sumitomo and Mitsui banks, was announced in 1999.2.2. Competitive AdvantageThe role of foreign direct investment is crucial for developing countries t o generate employment opportunities. Michael Porter uses the concept of competitive advantageinstead of comparative advantage to explain this situation.My understanding of his definition of competitive advantage is as follows:VCM denotes value chain man agement, and independent variables of competitive advantage are VCM and core-competence. That is,(i) Competitive advantage = f1 (VCM, core-competence).And VCM depends of cost performance, quality and speed, and must attain the minimum cost. Value chain management by MNCs requires value chain networking in Pacific basin countries.(ii) VCM = f2 (cost performance, quality, speed).Core-competence can be obtained by the generation of a brand name, or(iii) Core-competence = f3 (brand-name).Brand marketing depends on commercial considerations as well as culture and tradition.(iv) Brand marketing = f4 (commercial, culture and tradition), where brand marketing (for example televisions, personal computers, mobile phones) is one of the crucial measures in order to have a competitive advantage. A product consists of a function and brand name. We can illustrate it as follows:on the one hand a necktie without a brand name costs US$10, and on the other a Channel necktie costs US$200. The difference of US$190 is g enerated by the brand name. A personal computer with an Intel component can be sold well. It is necessary for a company to invest and have strategies in order to diffuse the brand name as shown in Figure 4-7. Investment in brand strategy is a fixed cost an d the same type of capital equipment. Figure 4-8 shows that the larger the scale of a company the lower the average cost. Figure 4-9 is a case where a company outsources its processes of procurement of parts and components, and assembly. Consumers buy a commodity for function and brand name. That is why brand marketing is crucial for MNCs to survive in international competition.Now we will explain competitive advantage in terms of cost by using Figure 4-9. Total cost is equal to proportional cost plus fixed cost. Here proportional costs are wages, materials, etc. Fixed costs are fixed equipment, design and development, and costs for brand marketing. For a country, it is also important to obtain a competitive advantage over other countries. Michael Porter indicates the following four factors in determining the competitive advantage of a country. That is, (i) Resource endowments (natural resources, artificial resources, capital, and infrastructure), ii) Clustering of related industries and local suppliers, (iii) Hard competition among companies, (iv) A large scale domestic market with high-end customers. Only some of the items discussed in this article overlap with the items indicated by Porter’s factors mentioned above. This paper discusses how value chain man agement can enhance an industry’s competitive advantage.2.3. Global Optimization and Regional Optimization of Multinationals in theNetworkUnder the conditions described in sections (1) and (2), we will show a typical case of regional optimization. Examples in the actual economy are discussed here. For instance, Tianjin, China is regarded as an automobile cluster. This section examines the role of Tianjin in the Chinese industry’s network formation as an example. In the optimization of a value chain network, a process of assembly and manufacturing does not exist independently from the processes of design, procurement and marketing. That is, a value chain that must be considered comprehensively as is indicated below: (i) Research and development, (ii) Procurement of parts and components, (iii) Human resource development, (iv) Assembly and production, (v) Aftercare service. In an examination of the global optimization of a supply chain as part of value chain management, the point to be considered is whether the Asian strategy, European strategy, and American strategy can be examined independently for the time being as a first step.We will explain why a solution for global optimization for value chain management is the same as those for optimization independently by Asia, America and Europe. One of the objectives of value chain management is to reduce costs thus ensuring an ‘international competitive advantage.’ The important factors for cost reduction are the tax system (such as customs duty), transportation costs (from Asia to Mexico), labor costs, and stock costs (in particular, interest). Customs duty is greatly influenced by (i) industrial policies of a country, (ii) regional cooperation, and (iii) international economic cooperation. The examples are as f ollows:(i) Preferential tariff rates to introduce foreign direct investment,(ii) Free trade agreements that will be activated for regional cooperation in East Asia, (iii) Liberalization policy of WTO (World Trade Organization).These elements contributed in having an influence on the determination of the customs duty by each country and by each region, which also influenced the costs of firms.This concept is applicable to East Asia also. The elements are: first, improvement of laws that positively effect direct investment in each country including Thailand and Korea after the Asian Currency Crisis; second, as for regional cooperation, early implementation of reduction of customs duty within the area by the early realization of AFTA (Asian Free Trade Area).Firms must consider whether a tariff system is influenced by these factors as a precondition when forming a globally optimal value chain network in order to maintain a competitive advantage.Even when value chain management is global, multinational firms optimize regionally in the case that transportation costs are too high to procure components form other regions. The regions are (1) Asia, (2) EU, and (3) America. Then the Asia-Pacificregion is one area optimized regionally. The objective of value chain management is to maximize competitive advantage for customers’ satisfaction in Asia.We will illustrate a value chain network in Figure 4-10. V alue chain network strategies of M&As, alliances, and outsourcing are taken among the Asian countries in this example. The core-competence of this company exists in design and planning. Recently US companies have focused on a process of marketing and aftercare-service.2.4. Optimal Size of a Region of Value Chain ManagementHere we illustrate an optimization of t he value chain network in Asia strictly. CA denotes competitive advantage. An objective function to be maximized is as follows: CA = f (Ci,n1, Dj,n2, Pk,n3, Al,n4, Mm,n5), i, j, k, l, m =1, 2, 3 or 4,and each of n1, n2, n3, n4, and n5 in Asia represents a name of its location such as Tianjin, Shanghai, and Japan, where 1, 2, 3, or 4 denotes domestic production, mergers and acquisition s, alliances and outsourcing, respectively. Optimization of the value chain network means that we evaluate all the cases of combination, and choose the highest rate of CA. When multiple solutions are available, a CEO (chief executive officer) of a multinational chooses one of them. We can illustrate a value chain network of Toyota as is shown in Figure 4-10.The value chain network has two characteristics. First, it is different from the model of intra-firm trade that is internationally a vertical or horizontal division of labor of parts and components in Asian Pacific nations. Second, due to the first characteristic, outsourcing strategy is a key factor to reduce cost. Contract manufactures play important roles, which are also different from subcontractors with close relationships to parent companies of multinationals. The management system is changing from an ‘internationally horizontal division of labor by intra-firm trade’ to a ‘regional value chain network.’ As is shown later, Toyota decided to build a plant in Tianjin and procure components from Shanghai, Japan, and Tianjin to maximize competitive advantage by cross dock logistics explained later.3. A Flowchart FrameworkA typical model in East Asia consists of the following factors: (a) industrial zones: port, roads, (b) capacity building: institutions, infrastructure, human resources, living conditions, (c) anchor firms, and (d) related firms. These factors form a cluster and enhance regional economic growth.Figure 4-1 is a flowchart of industrial cluster policy which can be generalized to the policy taken in East Asia. First, we consider the market for product sales by taking into consideration (a) industrial zones. There are two types of market, domestic andforeign. The Export Processing Zone in Kaousing in Taiwan established in 1965 was the first in Asia. The Free Trade Zone in Penang, Malaysia in 1971 and the Export Processing Zone at Tan Tuan near Hochiminh, Vietnam in 1993, have the same anchor firm as in Kaousing. Products in most developing countries are exported since their population is small and incomes are relatively low in early stages of development. It is usual that developing countries need to establish export processing zones to invite foreign direct investment.But industrial zones are not enough to invite anchor firms and (b) capacity building is needed to form an industrial cluster. Capacity building consists of the following factors: physical infrastructure, institutions, human resources, and living conditions. Kuchiki (1997) showed that 100% ownership of capital and tax reduction or exemption was crucial to success in inviting foreign direct investment in East Asia as part of institutional reforms. Cheap labor in the 1980s in East Asia as an initial condition was also a crucial factor for success as part of human resource development. Human resources are classified as unskilled labor, skilled labor and professionals such as accountants and researchers. Living conditions are facilities like hotels, international schools, banks, shopping, entertainment, and hospitals.(c) An anchor firm with (d) its related firms forms a cluster. Matsushita’s Panasonic division is a Japanese electronics firm in Shah Alam in Selangor, Malaysia and with its related firms is a typical case of an industrial cluster in East Asia. Sogoshosha(1), which is a Japanese term for a trading firm playing the role of gate-keeper of a closed business circle, while Keiretsu plays a key role in inviting Japanese investors into industrial zones in East Asia. Sogoshosha firms that established industrial zones in Asian countries such as Thailand and Malaysia, asked their Keiretsu firms to be tenants, and formed agglomerations of Japanese firms in the industrial zones.In summary, (a) industrial zones or export processing zones and (b) capacity building are conditions to invite (c) anchor firms as step I of industrial cluster policy. Then, as step II, (d) their related firms build plants near the anchor firm if some conditions for the related firms hold. These steps are shown in Figure 4-1. In section 6 we will show that one of the sufficient conditions is scale economies in the case of Toyota’s related firms.4. Step I: Toyota’s Cluster in TianjinTianjin city has saucers to accept anchor firms and their related firms as is shown in Table 4-1. Tianjin city is 120 thousand square kilometers in size, has 9.19 million people, and is under the direct control of the central government with the largest artificial port in China. The city has industrialized by establishing industrial zones all over the city. The GDP growth rate of the city is 12.6%. The value of the contractedamount of foreign direct investment in Tianjin is US$5.81 billion and corresponds to that of Vietnam.We apply the flowchart of Figure 4-1 to Tianjin Toyota’s case of Figure 4-11. Three factors of (a) industrial zones, (b) capacity building, and (c) anchor firms are the key to forming industrial clusters in implementing industrial cluster policy. There are three characteristics as follows. First, Toyota’s market is domestic not foreign. Second, Tianjin has a problem of capacity building in fostering entrepreneurs. Third, cross dock logistics as a Just-In-Time way related to value chain management had effects on forming an industrial cluster in Tianjin. Toyotatsusho Corporation collects components in Shanghai and transports them to Tianjin. Tianjin Toyota needs to neither buy nor import non etheless its local content of components in China was 80% in 2002.(a) Industrial zones:The city has seven industrial zones at the national level. That is, Tianjin New Technology Industrial Park; TEDA established in 1984; Tianjin Port Tax Free Zone; Tianjin Export Processing Zone; Tianjin Tanggu Ocean Hitechnology Development Zone; National Tianjin Beichen Science Park; and Tianjin Weqing Hightechnology Development Zone. There are many industrial development zones in Tianjin at the city level as Table 4-1 shows. The number of Japanese firms in the rubber, glass, steel, non-ferrous, metal, machinery, electric appliances, transport equipment, and precision equipment industries total 106 and 53% of them invested in development zones (see Sososha (2003), A List of Japanese Firms’ Invested in China). Tianjin Economic Development Area (TEDA) at the national level is the largest among them. Tianjin Economic and Technological Development Area (TEDA) (2) is located in the southeast of the city, about 45 kilometers from downtown and 140 kilometers from Beijing. TEDA enjoys easy access to North China, Northeast China and Northwest China. The Beijing-Tianjin-Tanggu expressway runs through TEDA and divides it into two parts, the financial, trading and residential area covering 8.5 square kilometers to the south and an industrial park spanning acreage of 24.5 square kilometers to the north. TEDA is 130 square kilometer in size and its pillar industries are electronics and electric, food and beverage, pharmaceutical, and machinery. TEDA is the largest saucer in Tianjin to accept foreign firms.(b) Capacity building:Capacity building means facilitation of (i) physical infrastructure, (ii) institutional reform, (iii) human resource development, and (iv) preparation of living conditions.(i) Physical infrastructureThe port is one of the most attractive facilities in Tianjin. Other physical infrastructures are sufficient to invite foreign firms. As the largest freight terminal in North China, the harbor has an annual han dling capacity of over 100 million tons, 2 million TEUs (twenty-foot equivalent units) can be handled here each year, which will increase to 5 million TEUs by 2010. The port has freight exchanges with over 300 ports in 160 countries and regions around the world. With 47 container liner routes and nearly 200 international container liner routes, it is one of the world’s container hubs. With its 12-meter-deep two-way navigation channels, the port serves as the primary gateway for imports and exports for North China, Northeast China, and Northwest China. The port is used to import components and export products by Toyota. Table 4-2 illustrates the infrastructure of TEDA sufficiently to facilitate water supply, power supply, sewage treatment, gas supply, communication, and so on.(ii) Institutional reformPreferential treatment such as tax exemption or reduction and streamlined investment procedures in Tianjin are crucial to inviting foreign investors and almost the same as those of other cities in Guangdong an d Shanghai. Table 4-3 shows tax treatment of TEDA preferential to productive enterprises such as advanced-technology-oriented enterprises, export-oriented enterprises, and energy, communications and construction projects. The tax rate of enterprise income tax of advanced-technology-oriented enterprises is 15%. The enterprises may be granted a reduction in income tax by half for 3 more years and pay at a tax rate of 10% if the tax rate after reduction is less than 10%.Investment procedures should be streamlined and Figure 4-12 shows TEDA’s consulting services procedures. TEDA Economic Development Bureau (EDB) and Investment Promoting (IPC) are offices to accept foreign investors at the starting point. The main processes are as follows: to make an on-site trip to TEDA; to do feasibility studies; to decide investment; to apply for work permits and visas; to arrive in TEDA; and to register establishment of the enterprise.TEDA had followed a policy of inviting large-scale firms until 2000 but changed this policy and started inviting small- and medium-scale firms for supporting industry partly because of Toyota’s involvement in 2002. TEDA recommends the following automobile component industries: brake assembly, drive shaft assembly, transmission, diesel engine f u el pump, piston, bulb, hydraulic tappet, sliding bearing, aluminum radiator, bumper, car air-conditioner, lock, back miller, power window, unit meter, motor, light, die-casting for automobile use, and so on. This policy intends to invite component firms to supply components to assembly firms in Beijing, Tianjin, and other cities near Tianjin. The number of registered foreign firms at TEDA is more than 3,000。
Accounting Quality and Firm-Level Capital Investmen
THE ACCOUNTING REVIEWV ol.81,No.52006pp.963–982Accounting Quality and Firm-LevelCapital InvestmentGary C.BiddleHong Kong University of Science and TechnologyGilles HilaryHong Kong University of Science and TechnologyABSTRACT:This study examines how accounting quality relates tofirm-level capitalinvestment efficiency.Ourfirst hypothesis is that higher quality accounting enhancesinvestment efficiency by reducing information asymmetry between managers and out-side suppliers of capital.Our second hypothesis is that this effect should be strongerin economies wherefinancing is largely provided through arm’s-length transactionscompared with countries where creditors supply more capital.Our results are consis-tent with these hypotheses both across and within countries.They are robust to al-ternative econometric specifications,different measures of accounting quality andinvestment-cashflow sensitivity,and numerous control variables.Keywords:accounting quality;capital investment;corporate governance.I.INTRODUCTIONA significant body of prior literature examines relations between accounting qualityandfinancial market characteristics,yet little prior research exists that analyzes the effects of accounting quality on investment.Here,we examine how accounting quality relates tofirm-level capital investment efficiency,a key determinant of economic productivity.Our focus on investment in productive assets complements and extendsfind-ings on how accounting relates to publicfinancial markets’operating characteristics.For example,Bhattacharya et al.(2003)find that accounting opacity is associated with a higher cost of publicly traded equity capital across34countries.However,institutional features may be related tofirm-level capital investment differently than to equity market operations. For instance,privatefinancing from banks in Germany(e.g.,Gorton and Schmid2000), keiretsu in Japan(e.g.,Hoshi et al.1991),and families in East Asia(e.g.,Claessens et al. 2000)may obviate or alter the effects of institutional features from their operational rolesWe are grateful for the research assistance of Fenny Cheng and for helpful comments received from two anonymous reviewers,Mary Barth,Jean de Bettignies,Donal Byard,Songnian Chen,Dan Dhaliwal(the editor),Clive Lennox, Steve Orpurt,Douglas Skinner,Guochang Zhang,and workshop participants at Baruch College–CUNY,Cass Business School,Hong Kong University of Science and Technology,London School of Economics,Singapore Management University,University of British Columbia,and Waseda University.Professors Biddle and Hilary thank the University Grants Committee of Hong Kong forfinancial support(HKUST6435/05H).Editor’s note:This paper was accepted by Dan Dhaliwal.Submitted June2005Accepted May2006963964Biddle and Hilary The Accounting Review,October 2006in public equity markets.Hence,how accounting quality affects the efficiency of firm-level capital investments remains an open question of fundamental importance.In the neoclassical setting,managers (i.e.,firms)endowed with capital invest until the marginal return is zero,allowing for adjustment costs (e.g.,Tobin 1969;Hayashi 1982).In this baseline setting,we should not observe an association between internally generated cash flows and investment.But several frictions contradict this efficient result.One is capital rationing,which is generated by information asymmetry between managers and investors.Since at least Myers (1984),it has been shown that if managers can exploit private infor-mation to issue securities at inflated prices,then investors rationally withhold capital.A resulting reliance on internal funding increases the sensitivity of investments to cash.A second friction arises from agency problems,when managers pursue perquisite consumption and ‘‘empire building’’rather than returning excess cash to investors (e.g.,Jensen 1986;Blanchard et al.1994).1This behavior also may increase the sensitivity of investments to cash flows,but,in this case,the sensitivity is due to an excess of cash.Certain institutional features may serve to mitigate these deviations from the optimal investment policy.For example,Rajan and Zingales (2000)observe that ‘‘to function prop-erly,a financial system requires clear laws and rapid enforcement,an accounting and dis-closure system that promotes transparency,and a regulatory infrastructure that protects consumers and controls risk.’’Transparent accounting should reduce both adverse selection (i.e.,the tendency to issue securities at an inflated price)and moral hazard (i.e.,perquisite consumption using assets in place)by improving contracting and monitoring.2Thus,higher quality accounting may serve to enhance investment efficiency by mitigating these frictions.We examine this hypothesis by considering the effects of differences in accounting quality both at the country level and at the firm level within countries.To do so,we first estimate investment-cash flow sensitivities for firms from 34countries.We then consider how the average investment-cash flow sensitivity across countries varies with accounting quality.We measure accounting quality using three proxies for earnings quality described by Bhattacharya et al.(2003),as well as a measure of accounting timeliness from Bushman et al.(2004).We also are careful to control for the confounding effects of other institutional features,such as disclosure quality (CIFAR index),legal origin,creditor and shareholder rights,judicial efficiency,and economic conditions (e.g.,the degree of economic develop-ment).We find that higher accounting quality is associated with lower investment-cash flow sensitivity.We also find that other institutional features,particularly creditor rights and disclosure quality,play a similar but incremental role.These results persist after allowing for the possibility that operating cash flows convey additional information about short-term profitability (e.g.,Alti 2003).Having established that differences in accounting quality are associated with differences in the efficiency of capital investments across countries,we then examine how sources of financing (debt versus equity)affect this relation.A priori ,we expect accounting quality to play a stronger role in economies where financing is largely provided through arm’s-length transactions,for example,where stock exchanges are the dominant sources of capital,since here,investment decisions rely more heavily on public accounting disclosures.On the other hand,in economies where creditors play a more dominant role,banks may be able to obtain information through private channels (mitigating adverse selection problems),and they may be in a better position to directly monitor managers once capital is supplied 1Note that the existence of the agency problem ex post may lead to rationing of capital ex ante .2See Healy and Palepu (2001)for a review.Accounting Quality and Firm-Level Capital Investment965 (mitigating moral hazard).Thus,in credit-dominated economies,the quality of publicly disclosed accounting information should be less influential in decisions to supply capital than in public equity-dominated economies.Therefore,we should observe a smaller effect on capital investment decisions when accounting quality is improved in credit-dominated economies than in public equity-dominated economies.We test this hypothesis in two ways.Initially,we regress cashflow sensitivity on accounting quality in our cross-country sample,partitioning observations in two groups based on the prevalence of public equity versus debtfinancing.Wefind that higher ac-counting quality is associated with lower investment-cashflow sensitivity in economies that depend more on public equityfinancing compared with those more reliant on debtfinancing. Then,we examine the effect of accounting quality on investment efficiency at thefirm level in two selected countries.We do this for several reasons.First,it allows us to determine whether accounting quality operates similarly across and within countries.Second,it helps us to control for certain differences in characteristics across countries that could affect our cross-country results,such as correlations between accounting quality,legal origins,creditor rights,and administrative efficiency.Finally,as explained below,thisfirm-level analysis allows us to address certain econometric issues.In our within-country tests,we examine two polar cases—the U.S.and Japan—for several reasons.First,they are the two largest economies in the world with abundant ex-ternalfinancing available tofirms.Second,they provide large and diversifiedfirm samples with long time-series data that enable us to estimatefirm-specific parameters with a rea-sonable level of confiparable datasets are generally not available for other coun-tries.However,the U.S.and Japan differ along one important dimension.Public equity capital plays a much more dominant role as a source offirmfinancing in the U.S.than in Japan.Thus,we expect accounting quality to play a more important role in the largely arm’s-length transactions in the U.S.On the other hand,Japanese suppliers of capital,such as keiretsu and banks,have non-public sources of information and thus the quality of public accounting disclosures may be less relevant to their decisions to supply capital.Our results are consistent with these predictions.Accounting quality matters both statistically and ec-onomically in the U.S.where higher quality accounting is associated with lower investment-cashflow sensitivity,but we do not observe such a relation in Japan.Ourfindings contribute in at least two ways to the existing literature.First,they provide empirical evidence that accounting and other institutional features relate to the economic fundamentals offirm-level capital investment efficiency.In particular,accounting quality is shown to reduce frictions in the investment process.Wefind that this effect exists both across countries and within countries,even in the most liquid capital market,the U.S. Second,ourfindings confirm that this effect is stronger in economies where public equity capital plays a greater role in capital investmentfinancing compared with countries domi-nated by debtfinancing.This effect is observed in both our cross-and within-country tests.We proceed as follows.Section II reviews related research.Section III develops our hypotheses.Section IV describes our tests for relations between accounting quality and investment-cashflow sensitivity.Section V presents ourfindings.Section VI concludes the paper.II.RELATED RESEARCHEconomists have long studied howfinancial frictions affect investment decisions and economic growth.This literature is too extensive to review comprehensively here,thoughThe Accounting Review,October2006966Biddle and Hilary The Accounting Review,October 2006we discuss selected results in the ‘‘Overall Approach’’section below.3More recently,schol-ars in accounting,finance,and law have focused their attention on the effects of institutional features (such as legal structure or judicial enforcement)on market frictions and their consequences for capital investment.For example,Bhattacharya et al.(2003)have shown that the cost of publicly traded equity across 34countries is related to three different measures of earnings transparency.Francis et al.(2005)provide international evidence that dependence on external financing creates incentives for firms to undertake higher levels of voluntary accounting disclosure.However,the implication of these findings for firm-level investment is not straightforward.If equity financing were the only source of capital,then frictions in equity financing would probably lead to frictions in capital investing.However,firms can access multiple sources of financing.Thus,if one channel is inefficient (e.g.,public equity financing),then other sources such as debt,private financing,state subsidies,and intra-group capital transfers,for example,can substitute.In equilibrium,there may not be any differences in investment efficiency at the firm level,but simply cross-sectional differences in financing patterns.Consistent with this view,Demirguc-Kunt and Maksimovic (2002)find no evidence that a country’s relative reliance on bank versus stock market financing affects firms’access to external financing.Other studies have considered relations between institutional features and capital in-vestment at the industry level.For example,Wurgler (2000)measures cross-country capital allocation efficiency by industry-level elasticity of investment with respect to value added.He finds this measure to be positively related to the amount of firm-specific information available in domestic stock markets when measured by synchronicity,positively related to minority shareholder rights,and negatively related to state ownership.Rajan and Zingales (1998)show that industry growth is positively related to a financial development index.Our paper advances the existing literature in several ways.First,instead of considering the effect of institutional features on industry growth (e.g.,Rajan and Zingales 1998;Wurgler 2000)or on financial market development (e.g.,LaPorta et al.1997;Demirguc-Kunt and Maksimovic 1998),we focus on firm-level capital investment decisions.Second,we concentrate on accounting quality,a feature not examined in many prior studies (e.g.,LaPorta et al.1997;Demirguc-Kunt and Maksimovic 1998;Wurgler 2000).In addition,we consider the differences both between countries and between firms within a country.Third,our tests do not limit capital market frictions to their effects on capital rationing exclusively (e.g.,Fazzari et al.1988).Rather,we allow accounting quality to reduce either the lack or excess of cash.Finally,given the possibility that different sources of capital may substitute for each other,we do not limit our attention to any specific financing channel (e.g.,Bhattacharya et al.2003)and instead focus on capital investment behavior.III.HYPOTHESIS DEVELOPMENTTobin (1969)theorizes that capital investment is a function of the ratio between the stock-market valuation of existing real capital assets and their current replacement cost.Yoshikawa (1980),Hayashi (1982),and Abel (1983)reconcile this theory with the neo-classical interpretation.In this framework,the marginal Q ratio,q ,is the driver of capital investment policy.For example,Hayashi (1982)summarizes the model by stating,‘‘once q is known ...the firm can decide the optimal rate of investment though the knowledge of the installation function alone.’’He then proceeds to estimate this baseline model by regressing the investment rate on q .Fazzari et al.(1988)challenge this view and suggest 3See also Hubbard (1998)for a review and representative studies by Bagehot (1873),King and Levine (1993),Rousseau and Wachtel (1998),and Beck et al.(2000).Accounting Quality and Firm-Level Capital Investment 967The Accounting Review,October 2006that firms that are liquidity-constrained (i.e.,cannot externally finance their investments)need to rely more on their internally generated funds.Hoshi et al.(1991)summarize two possible justifications for capital rationing.On the one hand,moral hazard models suggest that outside financing can dilute managements’ownership stakes,thereby exacerbating incentive problems that arise when managers control the firm but do not own it.This ex post incentive problem reduces the amount of capital supplied ex ante .On the other hand,Myers and Majluf (1984)propose an adverse selection model.They suggest that if managers are better informed than investors about a firm’s prospects,they will try to sell overpriced securities.Rational investors will,in response,increase the cost of capital,thus decreasing the amount demanded.Therefore,in both cases,frictions operate to reduce the amount of external capital supplied to the firm.Firms that can generate cash internally are able to mitigate these effects,which causes capital invest-ment to be correlated with the availability of internally generated funds.There is presently a debate (see,for example,Fazzari et al.2000;Kaplan and Zingales 1997,2000)as to whether higher investment-cash flow sensitivity necessarily implies that firms are more financially constrained.In this paper,we remain agnostic on this issue since the problem may not be a lack,but rather an excess of cash.Capital investment can be correlated with internally generated funds simply because managers do not return to inves-tors excess cash coming from rents (and quasi-rents)and other assets in place.Casual empiricism suggests the existence of such overinvestment by managers and several theo-retical explanations have been proposed.For example,Jensen (1986)suggests that managers have incentives to grow their firms beyond their optimal size.4Whereas external financing subjects managers to monitoring and disciplining by capital providers,‘‘financing projects internally avoids this monitoring and the possibility the funds will be unavailable,’’thereby allowing managers to overinvest.Blanchard et al.(1994)provide empirical support for this view.They consider what managers do when they receive a cash windfall that does not change the investment opportunity set (i.e.,Tobin’s Q).In perfect financial markets,managers should return the money to the capital suppliers.Contrary to this expectation,Blanchard et al.(1994)find that managers tend to invest in unrelated projects that typically fail.Notice that all of these imperfections are predicated by the existence of information asymmetry between managers and outside suppliers of capital.If managers could commit to revealing all of their private information,then outsiders would not ration capital for fear of buying at an inflated price.Similarly,if higher quality accounting permitted perfect monitoring,then no agency problem would arise (see,for example,Antle and Eppen [1985]for a formal model of this idea).We would then be back to the baseline neoclassical model and internally generated cash flows would play no role in investment decisions.Our main hypothesis is predicated on this idea:H1:Higher quality accounting reduces the investment-cash flow sensitivity at the firmlevel.We further predict,based on the reasoning above,that this effect should be stronger in economies where financing is largely provided through arm’s-length transactions,for ex-ample,where the stock market is the dominant source of capital.On the other hand,in 4For simplicity,we use ‘‘empire building’’as our main way to motivate overinvestment.However,there are other models leading to a similar pattern such as overconfidence (e.g.,Heaton 2002),the ‘‘quiet life’’(Bertrand and Mullainathan 2003),and reputation (e.g.,Baker 2000).968Biddle and Hilary economies where creditors play a central role infinancing,banks may be able to obtain information through alternate private channels(and thus mitigate adverse selection prob-lems).They also may be in a better position to monitor the managers directly once the capital has been supplied(and thus mitigate the moral hazard).In this case,accounting quality should be less relevant to their decisions to supply capital and,as a result,we should observe a smaller effect of accounting quality on investment efficiency in credit-based economies.This leads to our second hypothesis:H2:Higher quality accounting reduces the investment-cashflow sensitivity more in economies dominated by stock markets than in those dominated by creditors. Notice that we do not form any prediction as to whether one type of economy is better than the other in mitigating frictions in the investment process.IV.CASH FLOW SENSITIVITY:EMPIRICAL SETTINGOverall ApproachWe employ both cross-and within-country tests,each with its own advantages.In the cross-country tests,average investment-cashflow sensitivities are estimated by country us-ingfirm-level data and then regressed on accounting quality and other variables of interest. This testing approach is likely to enhance the power of our tests by increasing both the cross-sectional variation and the magnitudes offinancial frictions.It also enables us to consider the effects of institutional factors,such as creditor rights and legal origin,which cannot be easily studied in a single-country setting.As observed by Francis et al.(2005),‘‘the United States is generally viewed as having a frictionlessfinancial market with rela-tively easy access to externalfinancing,and therefore it is not clear if U.S.findings nec-essarily generalize to countries with differentfinancial or legal systems.’’However,the cross-country approach also has some limitations.First,it is difficult to obtain sufficient time-series data from multiple countries to estimatefirm-specific parame-ters.Second,different institutional settings and accounting rules make it difficult to compare firm-based measures across countries.For example,since asset revaluation is permitted in some countries but not in others,plant,property,and equipment and depreciation measures convey different meanings.To address these issues and to provide corroborating evidence that the hypothesized effect of accounting quality on investment efficiency operates within as well as across counties,we further examine two contrasting countries:the U.S.and Japan.Both countries have large economies with ample sources of externalfinancing.How-ever,in the U.S.,stock markets play a central role in providing capital,while in Japan, keiretsu and banks are the major source of capital.As documented by Wurgler(2000),the ratio of stock market value to total credit market value is0.64for the U.S.but only0.15 in Japan.Our focus on the U.S.and Japan allows us to assess whether the dominant form offinancing influences the effect of accounting quality on investment decisions. Samples and DataTo enhance comparability with prior research,we utilize data from the same set of34 countries examined by Bhattacharya et al.(2003).For our cross-country tests,accounting andfinancial data are obtained from Compustat Global Vantage for the entire coverage period of the database(1993to2004).Accounting andfinancial data for the within-country tests are obtained for the U.S.from Compustat and for Japan from the PACAP database (1975to2001).The longer time series for the within-country samples allow us to estimate The Accounting Review,October2006Accounting Quality and Firm-Level Capital Investment 969The Accounting Review,October 2006firm-specific parameters and utilize them in panel specifications.We focus on industrial firms and,as is customary,exclude utilities and firms in the financial,real estate,insurance,and public administration sectors.5Our resulting sample includes only publicly traded com-panies with access to public sources of capital.As these firms also can potentially access alternate sources of capital including bank loans,governmental financing,and private equity when public markets are inadequate,this provides a lower bound for the effects of ac-counting quality and other institutional features.Private firms with lesser access to capital and weaker outside monitoring would benefit relatively more from enhanced institutional features than would firms with more access to capital and stronger outside monitoring.Proxies for Accounting QualityFor our cross-country tests,we use four country-specific measures of accounting qual-ity.Three of these measures are adapted from Bhattacharya et al.(2003)and a fourth from Bushman et al.(2004).Earnings aggressiveness is based on the converse of conservatism as defined by Ball et al.(2000).Following Ball et al.(2000)and Bhattacharya et al.(2003),we expect countries with more aggressive accounting practices to exhibit lower firm-level capital investment efficiency than countries with less aggressive accounting practices.Loss avoidance is the ratio of the number of firms with small positive earnings minus the num-ber of firms with small negative earnings divided by the sum of the two.This proxy is derived from Burgstahler and Dichev (1997)and Degeorge et al.(1999)who employ a similar measure for U.S.firms.Following Bhattacharya et al.(2003),we expect countries with greater loss avoidance to exhibit lower capital investment efficiency than coun-tries with less loss avoidance.Earnings smoothing is based on the cross-sectional correlation between the change in accruals and the change in cash flows scaled by lagged total assets.Following Leuz et al.(2003)and Bhattacharya et al.(2003),we expect countries with a greater degree of earnings management to exhibit lower capital investment efficiency than countries with a smaller degree of earnings management.Following Bushman et al.(2004),Timeliness is based on the average ranking of ‘‘answers to the following interim reporting questions:frequency of reporting,count of disclosed items,and consolidation of interim reports.’’We expect countries with timelier reporting to exhibit higher capital investment efficiency than countries without timely reporting.Because we are agnostic regarding which dimension of accounting quality plays a more significant role,we aggregate the four accounting quality measures into a summary index (AQ).In order to combine them meaningfully,we first form binary specifications.We do so by creating four binary variables for earnings aggressiveness,loss avoidance,earnings smoothing,and timeliness based on whether they have a better value than the median value in the cross-country sample.We then create AQ by summing up these four binary bining the four measures into an index has the advantage of reducing the effects of measurement errors in the individual accounting quality measures.This index also is more comparable with the index variables for creditor and shareholder rights developed by LaPorta et al.(1997)introduced as control variables below.65We focus on industrial and commercial companies and,following prior studies,exclude U.S.firms with SIC codes between 4900–4999,6000–6999,and above 9000,and those trading as American Depository Receipts (ADRs).We exclude Japanese firms with INDID codes starting with 05,06,and 08.6AQ takes values between 0and 4.Below,we also control for financial disclosure as measured by an index created by the Center for International Financial Analysis and Research (CIFAR).The CIFAR index can poten-tially take values between 0and 100.To make AQ and CIFAR more comparable,we also normalize CIFAR by forming a variable that takes a value between 0and 4based on quintiles of the distribution of CIFAR .Our results (untabulated)are not affected by this transformation.970Biddle and HilaryThe Accounting Review,October 2006In our within-country tests for the U.S.and Japan,we employ firm-specific accounting quality measures,AQ FS ,reflecting the uncertainty in accruals following Dechow and Dichev (2002).Francis et al.(2005)find that this measure of accounting quality is the most closely associated with their measure of the cost of capital.In Dechow and Dichev (2002),accruals quality is measured by the extent to which working capital accruals explain current-period,prior-period,and future-period operating cash flow realizations.The unexplained portion of the variation in working capital accruals is an inverse measure of accruals quality (with a larger unexplained portion implying lower quality accounting).Details of the estimation procedure are provided in the Appendix.We predict that higher quality accruals will be associated with higher capital investment efficiency especially in countries that rely on capital provided through arm’s-length transactions.Proxies for Investment-Cash Flow SensitivityWe use two different but comparable procedures to measure investment-cash flow sen-sitivity in the cross-country and within-country tests.In the cross-country tests,we mirror the prior literature (e.g.,Fazzari et al.1988;Hoshi et al.1991)by estimating investment-cash flow sensitivities after controlling for investment opportunities using Tobin’s Q (prox-ied by the market-to-book equity ratio,MTB ).Given the heterogeneity of our cross-country sample,outliers could induce nonlinear relations.A standard approach to alleviating this problem is to take the log of the variables,which we apply to market-to-book ratios.However,operating cash flows and investments often have negative values for which a log transformation is not defined.For them,we use an arctangent transformation that in effect ‘‘logs negative values.’’7The following model is estimated (using firm fixed effects)for each country:i I /K ϭϩOCF /K ϩMTB ϩε(1)i ,t i ,t Ϫ101i ,t i ,t Ϫ12i ,t i ,t where I i,t /K i ,t Ϫ1is capital investment scaled by the beginning-of-period capital for firm i in period t ,OCF i,t is the operating cash flow,1is our measure of investment-cash flow sensitivity,εi,t is a normally distributed error term with a mean of zero,and it represents usual idiosyncratic errors.This specification has two appealing features.First,it does not require a long time-series for each firm to estimate the parameters,which allows us to use pooled cross-sectional data to estimate an average investment-cash flow sensitivity for each country.This feature is important because Compustat Global Vantage contains a maximum of only 11years of data.Second,this specification has been extensively used in the prior literature.However,it relies on MTB to proxy for Q.To the extent that MTB does not fully capture investment opportunities,cash flows may pick up measurement errors that are correlated across coun-tries with accounting quality.We address this concern in several ways.In our cross-country tests,we include future cash flows (Alti 2003)and we use an instrumental variables approach in some specifica-tions.In our within-country tests,we use two databases,Compustat for the U.S.and PACAP for Japan,which provide longer time series.This allows us to use an alternate test that does not rely on estimating Q.By doing so,we have a natural robustness check for our 7The arctangent function is approximately linear over the range (Ϫ1;1).In cases where the absolute value of investment or cash flows is less than net fixed assets,the data are changed little by the transformation.However,when the absolute values of these scaled variables increase beyond 1,the transformed value is bounded by /2.This transformation provides a convenient way of winsorizing the data.。
管理会计课件MgtAcc1a
Contents of COGS
= + = + = = = Direct materials purchased adjusted for change in level of unused materials Direct materials put into production Direct labour applied to production Prime Cost Factory overhead Manufacturing cost applied adjusted for change in level of work in progress Cost of Goods Manufactured (COGM) adjusted for change in level of unsold products Cost of Goods Sold (COGS)
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I. II. III. IV. V. VI. VII.
Research Development Marketing Production Sales Distribution After-sales service
The value chain
market & technical the most expensive step! simultaneously with:
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How value is added
Quality : the customer's right Technology : improved functionality
(but shorter product lives through built-in obsolescense)
Markets and Hierarchies
TRANSACTION COST FRAMEWORK
Copyright © 2018, 2013, 2009 Pearson Education, Inc All Rights Reserved
corruption of the strategic decision-making process – tops managers of departments further their own goals rather than the overall goals of the organisations
INFORMATION AND ORGANISATIONAL DESIGN
LUBS5002
Markets and Hierarchies
OBJECTIVES
Apply the concepts of transaction cost economics to the understanding of efficient organisational structure.
• Effects on internal/external TC’s are industry specific but most dramatic for ‘information goods’ (books, films, music).
DIGITIZATION AND TRANSACTION COSTS
control – location decision-making rights within hierarchy
(Besanko et al, 1996)
Oncoplastic Surgery for Japanese Patients with Cen
Mar. 2011, Volume 8, No. 3 (Serial No. 76), pp. 133-137Journal of US-China Medical Science, ISSN 1548-6648, USAOncoplastic Surgery for Japanese Patients with Centrally Located Breast Cancer: Partial Resection and Reconstruction Using a Local Skin-Glandular FlapYuko Kijima, Heiji Yoshinaka, Munetsugu Hirata, Tadao Mizoguchi, Sumiya Ishigami, Akihiro Nakajo, Hideo Arima, Youta Kawasaki, Shinichi Ueno and Shoji NatsugoeDepartment of Surgical Oncology, Breast and Endocrine Surgery, Kagoshima University Graduate School of Medical and Dental Sciences, Kagoshima 890-8520, JapanAbstract: We report the results of oncoplastic surgery in two Japanese patients with centrally located early breast cancer (CLBC). In both patients, their breasts were ptotic, and their lesions were considered to be suitable for breast conservative surgery. Partial mastectomy resection including the nipple-areola complex (NAC) was performed followed by immediate defect repair using a skin-glandular flap. The technique was easy to perform, and the cosmetic outcome was good.Key words:Oncoplastic surgery, breast cancer, skin-glandular flap.1. IntroductionOncoplastic techniques have succeeded in expanding the role of breast conserving therapy (BCT) to centrally located breast cancer (CLBC) [1]. It is reported that central quadrantectomy with repair using a skin-glandular flap is a relatively simple procedure that yields very satisfactory cosmetic results and minimal complications, and it is considered an appropriate therapeutic option for patients with CLBC. We performed this procedure on two Japanese patients with ptotic breasts.2. Case ReportA preoperative study using mammography, ultrasonography, computed tomography, histological examination (core needle biopsy or wedge biopsy of nipple erosion), bone scintigraphy, and magnetic resonance imaging was performed on each patient. Case 1 was diagnosed as having T1N0M0 cancer onCorresponding author: Yuko Kijima, MD, PhD, research fields: surgery, plastic surgery, treatment for breast cancer. E-mail:***************.kagoshima-u.ac.jp.central area and case 2 was Paget disease with intraductal components restricted to the retroareolar area, respectively. As a result, they were diagnosed as CLBC. Neither patient suffered from systemic disease or distant metastasis. Their breasts were ptotic, and their nipples were located beneath the inframammary line. Informed consent was obtained from each patient prior to oncoplastic surgery at our institution.On the day before surgery, the patients were seen by the breast surgeon so that he could plan the operation, make drawings. With the patient in a standing position, the surgeon made sure that the nipple was located below the inframammary line. With the patient in a supine position, the edge of the tumor was determined by ultrasonographic examination and marked on the skin surface. Then, the partial mastectomy line was marked using permanent ink, in the form of a circular line 2 cm beyond the tumor edge (case 1) or the area of skin erosion (case 2).In case 1, we removed cylinder gland having a surface and bottom with circles having 60 mm of diameter; 20 mm of normal breast tissue around acancerous lesion with a diameter of 20 mm. In case 2,ll Rights Reserved.Oncoplastic Surgery for Japanese Patients with Centrally Located Breast Cancer: Partial Resection andReconstruction Using a Local Skin-Glandular Flap134the circles of surface and bottom had 50 mm of diameter. Finally, the curvilinear flap and the neonipple line were marked on the breast (Figs.1 and 2) with the patient in a standing position.The cylinder gland was removed together with the fascia of pectoralis major muscle (Fig. 3). During the operation, several surgical margins were histologically examined to ensure that the cancerous lesion was completely removed. A curvilinear flap was obtainedinferiorly to the defect (Fig. 3). The flap was then de-epithelialized, except for a circular area of skin close to the defect, which was lifted intact in order to form the neonipple with blood supplied from a lateral pedicle (Fig. 3). The flap was incised medially and along the inframammary fold down to the pectoralis fascia, before being undermined laterally from the fascia to allow the rotation and advancement of the flap to fill the defect (Fig. 3).(a) (b) (c)Fig. 1 Case 1– 55-year-old with right breast cancer: (a) Preoperative findings. Her breasts were relatively large and ptotic. (b) The edge of the centrally located breast cancer was drawn onto the skin using red ink with a surgical margin of 2 cm. (c) One year postoperative findings.(a) (b) (c)Fig. 2 Case 2, 82-year-old with left Paget’s disease. (a) Preoperative findings. Her breasts were relatively small and ptotic. An erosive nipple lesion with a clear margin. (b) A surgical margin of 15 mm from the edge of the erosion was drawn on the skin using black ink. The neo-nipple was drawn using blue ink. (c) One year postoperative findings. ll Rights Reserved.Oncoplastic Surgery for Japanese Patients with Centrally Located Breast Cancer: Partial Resection and Reconstruction Using a Local Skin-Glandular Flap135(a) (b) (c) (d)(e) (f) (g) (h)Fig. 3 (a) The cylinder gland was removed together with the pectoralis major muscle. (b) A curvelinear flap was obtained inferiorly to the defect. (c) The flap was de-epithelialized, except for a circular area of skin, which was lifted intact in order to form the neonipple. (d) The flap was incised medially along the inframammary fold down to the pectoralis fascia, before being undermined laterally from the fascia to allow the rotation and advancement of the flap to fill the defect. (e) The skin-glandular flap was rotated into the central quadrantectomy defect. (f) A deep section was sutured into the deep aspect of the breast defect using two to three 3-0 Vicry l sutures to fill the empty space. (g) The circular areolar defect was closed around the skin disc in two layers using 4-0 PDS sutures. (h) After closure.The skin-glandular flap was then rotated into the central quadrantectomy defect, and its deep part was sutured to the deep aspect of the breast defect with two to three 3-0 Vicry l sutures to fill the empty space around it and to ensure adequate projection to the tip of the breast mound (Fig. 3). After the closure of the donor defect inferiorly, a suction drain was inserted close to the pectoralis major muscle (Fig. 3). Then, the circular areolar defect was closed around the skin disc in two layers, one subcutaneous layer of interrupted 4-0 PDS sutures and another subcuticular continuous layer of 4-0 PDS sutures (Fig. 3). The skin edge at the medial breast pillar was then sutured in the same manner as thelateral edge of the designed flap, thereby burying its de-epithelialized surface. The discrepancy between the two edges was equally distributed along the length of the wound to avoid a dog ear at its lower end (Fig. 3). Sentinel lymph node (SLN) biopsy and axillary lymphadenectomy was performed for case 2 and case 1, respectively. On both patients, other incisions were added on axillary area to remove axillary lymph nodes or SLN. In our institution, postoperative radiotherapy is administered to selected patients whose lesion is located within 10 mm of the surgical margin and contains both invasive and intraductal components for all patients who received BCS not only CLBC but alsoll Rights Reserved.Oncoplastic Surgery for Japanese Patients with Centrally Located Breast Cancer: Partial Resection andReconstruction Using a Local Skin-Glandular Flap136non-CLBC. So we added the description. Neither of the presented cases required radiotherapy as histological margins of over 10 mm was maintained from the edgeof the resected area to the cancer lesion on the permanent sections.3. DiscussionPatients with central breast cancers account for 5 to 20% of breast cancer cases and, for a long time, they have been denied BCT and have instead been conventionally treated with mastectomy [2]. The high incidence of nipple-areola complex (NAC) involvement associated with these tumors necessitates nipple and areola resection together with an adequate safety margin around the tumor, which yields an acceptable cosmetic result. Horiguchi et al. compared patients with CLBC (n = 13) and non-CLBC (n = 320) after BCT and showed no significant difference in local recurrence-free survival [3]. The simple closure of this type of defect, both vertically and horizontally, gives a particular shape to the breast that makes it look like it has been amputated at the tip [4].Both former procedures were exclusively used for esthetic purposes until Grisotti combined them in the early 1990s and introduced an oncoplastic technique for the reconstruction of central quadrantectomy defects involving the NAC [5]. His techniques were re-evaluated by Galimberti et al. and Schondorf, and both reported very satisfactory cosmetic results with minimal complications. Recently, a retrospective analysis of small cohorts suggested that BCT is oncologically safe for patients with CLBC [6, 7]. Fitzal et al. analyzed 1485 patients with breast cancer who underwent breast conserving therapy and compared CLBC patients with non-CLBC patient, and their results demonstrated that BCT for CLBC is oncologically safe and that oncoplastic techniques improve cosmesis [8]. BCT for CLBC was first described as early as 1981 without oncoplastic surgery and in 1993 with oncoplastic surgery in 37 patients using the risotto flap for nipple areola complex reconstruction, which is similar to the B-technique used for breast reconstruction [6, 9].We have introduced oncoplastic surgery at our institution and have analyzed our results according to cancer location and the size of the original breast. For patients with small breasts, we were able to easily repair the defect using extra-mammary tissue, such as a local adipofascial flap or a distant free dermal fat graft [10-13]. On the other hand, for patients with relatively large and ptotic breasts, oncoplastic surgery combining a reduction type operation and recentralization of the nipple areola complex produced good results [14, 15]. In another patient with ptotic breasts who was diagnosed with ductal carcinoma in situ in the lower area of the breast with intraductal spread to the nipple, we successfully performed an oncoplastic procedure involving an amputation type partial mastectomy and grafting of the NAC [16]. From these experiences, we now indicate reduction type oncoplastic surgery rather than a filling type procedure for patients with large or ptotic breasts, such as Western women. In this study, we have found that, with the help of oncoplastic surgical techniques, BCT can be offered to Japanese patients with CLCB, whose breasts are not as large as those of Western women. It is thought that oncoplastic surgery using a skin-glandular flap is suitable for patients with CLBC that has invaded into the NAC in whom the intraductal spread is restricted to just below the central area (as in case 1) and those with Paget’s disease without wide-ranging intraductal spread (as in case 2) and relatively large or ptotic breasts. The same indication was reported by Nabuib et al. for women with medium to large breasts and Paget’s disease that does not exceed 3-3.5 cm, thus allowing excision of less than 1/3 or the breast [17]. One drawback of this technique is the formation of a curved scar from the central skin to the inferolateral area of the breast. Scar formation might be reduced by selecting another oncoplastic technique for patients with CLBC, such as the Purse-String technique or Wedge resection [8]; therefore, we need to compare different techniques forll Rights Reserved.Oncoplastic Surgery for Japanese Patients with Centrally Located Breast Cancer: Partial Resection andReconstruction Using a Local Skin-Glandular Flap137CLBC in order to clarify the usefulness of each technique for Japanese patients in the near future. Although the follow-up periods are short and only two cases are reported in this paper, we have revealed that oncoplastic surgery for patients with CLBC is ontologically safe and produced good symmetry. Oncoplastic techniques have succeeded in expanding the role of BCS to CLBC. Central quadrantectomy with repair using a skin-glandular flap is a relatively simple procedure that yields very satisfactory cosmetic results with minimal complications and it may be considered as a suitable therapeutic option for patients with CLBC tumors in Japan as well as Western countries.4. ConclusionThese results indicate that oncoplastic techniques should be used for BCT in patients with CLBC in order to improve cosmetic results.References[1] F. Fitzal, G. Nehrer, D. Hoch, O. Riedl, S. Gutharc and M.Deutinger et al., An oncoplastic procedure for central andmedio-cranial breast cancer, Eur. J. Surg. Oncol. 33 (2007)1158-1163.[2]O. Multon, D. Bourgeois, P. Validiere, J. R. Vilcoq, J. C.Durand and K. B. Clough, Breast cancer plaque–Breastcancer with central localization: Conservative treatmentby tumorectomy with ablation of the areolar plaque, PresseMed. 26 (21) (1997) 988-994.[3]J. Horiguchi, Y. Koibuchi, K. Iijima, T. Yoshida, D.Takata, N. Rokutanda et al., Local control by breast-conserving surgery with nipple resection, Anticancer Res. 25 (2005) 2957-2959.[4] A. Grisotti and C. Calabrese, Conservative treatment ofbreast cancer: Reconstructive problems, in: S. L. Spear(Ed.), Surgery of the Breast (2nd ed.), Philadelphia:Lippincott Williams & Wilkins, 2006, p.147.[5] A. Grisotti, Immediate reconstruction after partialmastectomy, Ope Techn Plast Reconsrt Surg. 1 (1994)1-12.[6]V. Galimberti, S. Zurrida, V. Zanini, M. Callegari, P.Veronesi and S. Catania et al., Central small size breastcancer: How to overcome the problem of nipple and areolainvolvement, Eur J Cancer. 29A (8) (1993) 1093-1096. [7]N. K. Schondorf, The technique of B-, S- or W- reductionmammaplasty in the conservative therapy of breast carcinoma: Experiences with a new surgical technique,The Breast 10 (6) (2001) 501-507.[8] F. Fitzal and M. Mittlboeck, Breast-conserving therapy forcentrally located breast cancer, Ann Surg. 247 (2008)470-476.[9]J. F. Paone and R. R. Baker, Pathogenesis and treatmentof Paget’s disease of the breast, Cancer 48 (1981) 825-829.[10]Y. Kijima, H. Yoshinaka, T. Owaki and T. Aikou, Earlyexperiences of immediate reconstruction using autologousfree dermal fat graft after breast conservational surgery, JPlast Reconstruct Aesthet Surg. 60 (2007) 495-502. [11]Y. Kijima, H. Yoshinaka, Y. Funasako, K. Kaneko, M.Hirata and T. Mizoguchi et al., Immediate breast reconstruction using autologous free dermal fat graftprovides better cosmetic results for patients with upperinner cancer lesion, Surg Today 41 (2011) 477-489. [12]Y. Kijima, H. Yoshinaka, T. Owaki, Y. Funasako and T.Aikou, Immediate reconstruction using inframammaryadipofascial flap of the anterior rectus sheath after partialmastectomy, Am J. Surg. 193 (2007) 789-791.[13]Y. Kijima, H. Yoshinaka, Y. Funasako, K. Kaneko, M.Hirata and S. Ishigami et al., Immediate reconstructionusing thoracodorsal adipofascial flap after partial mastectomy, The Breast 18 (2009) 126-129.[14]Y. Kijima, H. Yoshinaka, Y. Funasako, S. Natsugoe and T.Aikou, Oncoplastic surgery after mammary reduction andmastopexy for bilateral breast cancer lesions: Report of acase, Surg Today 35 (2008) 335-339.[15]Y. Kijima, H. Yoshinaka, S. Ishigami, M. Hirata, K.Koichi and Y. Funasako et al., Oncoplastic surgery forJapanese patients with ptotic breasts, Breast Cancer, DOI10.1007/212282-009-0190-0.[16]Y. Kijima, H. Yoshinaka, M. Hirata, K. Kaneko, M. Hirata,T. Mizoguchi et al., Oncoplastic surgery combining partialmastectomy with breast reconstruction using the freeNipple-Areola graft technique for a Japanese patient withDCIS in a ptotic breast: A case report, Surgery Today 41(3) (2011) 390-395.[17]S. F. Naguib, Oncoplastic resection of retroareolar breastcancer: Central quadrantectomy and reconstruction bylocal skin-glandular flap, J. Egyptian Nat Cancer Inst. 18(2006) 334-347.ll Rights Reserved.。
The Japanese keiretsu system
The Japanese keiretsu system1.structure of the keiretsuthe name keiretsu (in japanese.系列) means literally “system”, “series” or “line”.keiretsu are groups of companies with very close business relations (munich business school, 2008). the core of these conglomerates is a bank which provides them with liquidity or loans and holds equity positions in the member firms.cross-shareholding, that means that the companies are shareholders of the most or every other company in the network without being the majority shareholder, and financial support of the bank make it nearly impossible for foreign investors to enter the japanese market through hostile takeovers (flath,2005, pp. 238-239).board members of one company are in many cases also board members,members of the supervisory board or consultants of other group enterprises.consequently,personal connections are keeping the group together in addition to the structural connections(kensy,2001,pp.202-203).personal relations are more important in the japanese society than in the western societies like the united states (us) or europe (allen and zhao,2007, pp.1-2).board members,the middle management and qualifiedemployees meet periodically to examine the market performance of the group as a whole and of individual firms determining potential improvements like product quality or cost reduction (kensy,2001,p.203).despite all these mentioned connections inside the network most of the companies are separate legal entities (flath,2005,pp.238).there are two different main types of keiretsu, the vertical and horizontal (intermarket) keiretsu.1.1 vertical keiretsua vertical keiretsu covers the whole value creation chain of a product and/ or service. in most cases, they are formed if the end product is made of many sub-products like in the car industry or the electrical industry. thereby, an industrial enterprise and/ or a trading company are the centre of a vertical network. a bank can also be part of the network centre, but that is not a precondition (argy and stein, 1997, p.108).generally, its structure is like a pyramid with the core company on top. the supplying companies are supposed to provide the industrial enterprise with resources, sub products and services so that the main product can be produced (flath,2005,p.246). therefore, the suppliers are responsiblefor the first step of the value creation chain, whereby every supplier has its special task (mcguire and dow,2008,p.337).some of them acquire the resources and deliver them to producing companies of the group.japan needs to import most of its required raw materials and due to its deflationary economic development the costs have to beminimized.consequently,the required raw materials must be purchased as cheap as possible without worsening the quality of the end product (munich business school,2008).the trading company of the keiretsu, called sōgō shōsha, is also able to undertake the purchasingtask.additionally,there are vertical keiretsu without a special purchasing company. several group firms produce the sub products(kensy,2005,p.204).every company provides the core producer with its special product. in the case of car producers as the core company like toyota,its keiretsu partners produce the electrical equipment, glass, metal and so forth. logistics service providers,cleaning service providers or headhunters can also be part of the network if these tasks are not carried out by any other network firm (woniak,2009).the production of the main product, e.g. a car, is thesecond step of the value creation chain. afterwards, the good must be distributed what is the task of the sōgō shōsha. however, the core industrial enterprise by itself or more than one trading company are also able to take on the last step of the value creation chain (kensy,2005, pp.204-205).every step in the value chain is well adjusted to reduce costs and time and to steadily improve the product (flath,2005,p.246). moreover, vertical keiretsu can be subdivided in seisan keiretsu (生産系列) and ryūtsūkeiretsu(流通系列). seisan keiretsu are vertical manufacturing networks which comprise the industrial entreprise and its suppliers but not a trading company.in turn,ryūtsū keiretsu are vertical distribution networks which only consist of an industrial company as the producer of the end product and a sōgō shōsha as the distributer without suppliers (munich business school, 2008).famous vertical keiretsu are toyota, honda,toshiba and hitachi (kensy,2001,p.204).1.2 horizontal keiretsuhorizontal keiretsu,called kigyō shūdans (企業集団), are intermarket business groups. they are networks which cover many different economic sectors. the core of the group is abank (munich business school, 2008).a sōgō shōsha, which purchases and sells products for all group members can also be part of it. every company is situated in a different major industry offering different goods and services to cover a wide range of the whole economy named the “complete set principle”(wan setto shugi) according to yoshikazu (flath,2005,p.239). if one company has no appropriate opportunities for reinvestment in its market sector, e.g. steel, it deposits surplus funds in the bank which can lend these funds to another group member with better investment opportunities in its market sector,e.g.electronics(perner,2007).they are connected by above mentioned cross-shareholding and personal business relations. trade between keiretsu members is very common as well.in general, up to 25 per cent sales and purchases are dealt inside the group (kensy,2001, pp.245-246).the horizontal keiretsu has no leading company which sets the strategic direction in contrast to a vertical keiretsu.all members are more or less equal,regularly discussing the short-term up to the long-term orientated objectives of the group (woniak,2009).there were six big keiretsu,also called presidents’clubs,which were all horizontal keiretsu covering nearlyevery important sector in the japanese economy.although all these big six companies (mitsui, mitsubishi,sumitomo,fuyo,sanwa,dai-ichi kangyo) represented just0.007% of registered companies in japan in 1994,they controlled a significant share of the whole japanese economy regarding assets, paid-in capital, sales and profits.generally,a company is able to be a member of a horizontal and a vertical keiretsu at the same time (watkins,2007) like kawasaki and furukawa in the dai-ichi kangyo (dkb) keiretsu.such companies are independent legalentities.nevertheless,they are fully dependent on their networks.2.changes of corporate governance and the keiretsu system since the 1990’sthe trigger for changes in the keiretsu system and the japanese corporate governance was the burst of the japanese bubble economy.many borrowers, companies as well as private investors, could not redeem their loans because of decreasing real estate and land prices after the bubble burst in 1991. besides, the firms had overcapacities which caused high fixed costs. the consumption declined which minimized revenues causing lossesfor many companies.as a result,many banks struggled with loan defaults (wood,1994,pp.102-111).especially the keiretsu banks lent cheap credits to their group members without an appropriate risk evaluation in the booming phase in the 1980’s.a number of banks were insolvent and even more banks were endangered to also file for bankruptcy. consequently, some banks merged voluntarily. in 1995, the japanese government passed a banking sector reform to restructure and to rehabilitate it. bad performing banks had to merge to prevent a banking crash causing a new crisis (iyoda, 2010,pp.83-84).hence,the number of banks decreased and keiretsu banks of different groups had to fuse.examples are the mergers of sakura bank (from the mitsui keiretsu) with sumitomo bank to create mitsuisumitomo bank,mizuho financial group has joined with fuji bank (from the fuyo keiretsu) and dai-ichi kangyo bank (from the dkb keiretsu) merged with the independent industrial bank of japan (goerzen,isobe andmakino,2006,p.454).as a result,some keiretsu merged to bigger networks like sumitomo and mitsui in 2000 to become the sumitomo mitsui banking corporation as well as sanwa became part of the mitsubishi group in 2001.so,the number of the big horizontal keiretsu reduced from six to four (mcguireand dow,2008,p.334).this development caused competition for cheap loans among the members of the new fused keiretsu.the banks were and are no longer able to offer cheap loans to every network firm because of increasing market pressure (munich business school,2008).nevertheless, certain keiretsu,especially smaller ones, dissolved after the insolvency or merger of their bank.some network firms went bankrupt without the support of their home bank in the deflationary environment and the economic distress after the bubble burst (wood, 1994,pp.75).the remaining former group members joined other networks or have been operating independently.there are following examples:network firms such as niigata steel have gone bankrupt,mitsui mining and japan metals & chemicals are reconstructing their organizations,and toho rayon has been integrated by another keiretsu group firm (goerzen,isobe and makino,2006, p.454).another reason for the strongly declining bank financing of the japanese corporate system is the easier access for companies to non-bank financial sources like the equity and the bond market due to regulatory changes by the japanese government since the 1980’s and the upcomingglobalisation(yoshikawa and mcguire,2007,p.11).issuing bonds and shares in addition to bank financing causes lower costs in a medium-term than dependency on only one bank. many companies have been aware of it at least since the struggling of the banking sector (katz, 2003, pp.204-208). moreover, the interdiction of forming a holding company was abolished in 1997.thus,japanese firms can organise themselves like conglomerates in other developedcountries.cross-shareholding is no longer the most important measure for building a company network.it is also heavily reduced because of the liberalisation of the japanese equity market in times of international capital market pressures due to globalisation (munich business school, 2008).the japanese firms and the government knew that they will have to face the global competition by deregulating and opening the domestic market for foreign investors (katz, 2003, pp. 148-149). as a result, foreign investors can enter the japanese market through buying the majority of shares of japanese companies. for instance, mitsubishi motors was taken over by daimlerchrysler (munich business school, 2008). hostile takeovers are possible since the 1990’s.however, there has never been a hostile takeover of a listed japanesecompany because its japanese shareholders rejected to sell at any price (word iq,2010). japanese companies have been becoming more international and also multinational.they have foreign shareholders and they invest in foreign companies as well.joint ventures between japanese and foreign companies are increasing.one reason is that the development of global business relations is crucial to remain competitive in globalization.as a consequence,the sōgō shōsha is shrinking in importance (iyoda,2010,pp.91-92).the presence of foreign investors in the japanese economy and the mentioned deregulations and structural changes has been shifting the japanese corporate governance model towards the anglo-american one. shareholder value is becoming more important creating rationalisation and profitpressure.hence,major principles like lifetime employment have been sacrificed (takei,h.,1999,p.3).inefficient keiretsu members which do not create synergy effects with the core business have been sold or separated from the keiretsu.profit maximization is now as crucial as personal relations,loyalty and group orientation (munich business school, 2008).however,the shift to shareholder-oriented corporategovernance is controversial in the japanese business society.several business representatives believe that the competitive advantage of japanese firms and the economic boom after the second world war are based upon the mentioned japanese ideals and values (flath,2005,pp.292-293).in sum, the japanese keiretsu system and the corporate governance have changed due to domestic pressures after the bubble economy and foreign influences caused by globalisation. nevertheless, the japanese economy is still preserving its own characteristics.about the author: bernhard fietz，master student of the school of management shanghai university. [科]。
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Mitsui-Soko Co,Ltd.
toshiba
ihi Ishikawajima-Harima Heavy Industries Co., Ltd
mitsukoshi
toray
toyota
CantorCO2e
Sumitomo Rubber Industries, Ltd., Tires and rubber under Dunlop brand
Mazda Motor Corporation
Presidio Ventures[9]
Sumisho Computer Systems, (USA), Inc., Information Technology[10]
尼康股份有限公司(Nikon Corporation)
日本邮船股份有限公司(Nippon Yusen Kabushiki Kaisha)
P.S.三菱建筑股份有限公司(P.S. Mitsubishi Construction Co., Ltd.)
三菱铝业股份有限公司(Mitsubishi Aluminum Co., Ltd.)
三菱化学股份有限公司(Mitsubishi Chemical Corporation)
三菱化工机股份有限公司(Mitsubishi Kakoki Kaisha, Ltd.)
三菱瓦斯化学股份有限公司(Mitsubishi Gas Chemical, Inc.)
三菱地所股份有限公司(Mitsubishi Estate Co., Ltd.)
三菱人造纤维股份有限公司(Mitsubishi Rayon Co., Ltd.)
明治安田生命保险相互会社(Meiji Yasuda Life Insurance Company)
honda
Mitsubishi Atomic Industry
Asahi Glass Co.
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
Sony
Ito-Yokado
Sagami Railway
Tokyo Broadcasting System
Kanebo
Oriental Land
N.serve Environmental Services GmbH
Sumitomo Mitsui Financial Group
Sumitomo Group 白水会
Mitsubishi Research Institute, Inc.
Mitsubishi Shindoh Co., Ltd.
Mitsubishi Steel Mfg. Co., Ltd.
Mitsubishi UFJ Trust and Banking Corporation (part of Mitsubishi UFJ Financial Group)
三菱扶桑卡客车股份有限公司(Mitsubishi Fuso Truck and Bus Corporation)
三菱原料股份有限公司(Mitsubihi Materials Corporation)
三菱UFJ信托银行有限公司(Mitsubishi UFJ Trust and Banking Corporation)
sanyo
panasonic
ASAHI BREWERIES，LTD
Fuyo Group 芙蓉会
yasuda
NSK LTD.
nissan
canon
marubeni
hitachi
Canon (Fuji Bank)
Hitachi (Shunkou), also part of Nissan Group.
mitsubishi group 金曜会
旭硝子股份有限公司(Asahi Glass Co., Ltd.)
麒麟麦酒股份有限公司(Kirin Brewery Co., Ltd.)
新日本石油股份有限公司(Nippon Oil Corporation)
东京海上日动火灾保险股份有限公司(Tokyo Marine & Nichido Fire Insurance Co., Ltd.)
Sumitomo Chemical Co., Ltd., Chemicals
Sumitomo Heavy Industries, Ltd., Machinery, weaponry, and shipbuilding
Sumitomo Mitsui Banking Corporation, Finance
三菱伸铜股份有限公司(Mitsubishi Shindoh Co., Ltd.)
三菱制钢股份有限公司(Mitsubishi Steel Mfg Co., Ltd.)
三菱制纸股份有限公司(Mitsubishi Paper Mills, Ltd.)
三菱物流股份有限公司(Mitsubishi Logistics Corporation)
JFE Holdings (Asano)
Keihin Kyuko Electric Railway (Fuji Bank)
Marubeni (Odate)
Matsuya (Nedsu)
Meiji Yasuda Life Insurance (Yasuda)
Mizuho Corporate Bank (Yasuda)
Kirin Brewery Co., Ltd.
Meiji Yasuda Life Insurance Company
Mitsubishi Aircraft Corporation
Mitsubishi Electric Corporation
Mitsubishi Estate Co.
Mitsubishi Heavy Industries, Ltd.
The Toyo Bunko
Seikei University
mitsui group 二木会
Mitsui & Co.,
Mitsui Construction Co.,
Mitsui Engineering and Shipbuilding Co.,
Mitsui Mining & Smelting Co.,
Sumitomo Light Metal Industries, Ltd., Nonferrous metals
Sumitomo Mitsui Construction Co., Ltd., Construction
Sumitomo Bakelite Co., Ltd., Chemicals
Sumitomo Forestry Co., Ltd., Lumber and housing
三菱综合研究所股份有限公司(Mitsubishi Research Institute, Inc)
三菱电机股份有限公司(Mitsubishi Electric Corporation)
三菱电线工业股份有限公司(Mitsubishi Cables Industries, Ltd.)
三菱东京UFJ银行有限公司(The Bank of Tokyo-Mitsubihi, Ltd.)
Mitsubishi Public Affairs Committee
The Mitsubishi Yowakai Foundation
MT Insurance Service Co., Ltd.
Seikado Bunko Art Museum
Shonan Country Club
Sotsu Corporation
Nippon Sheet Glass Co., Ltd., Glass
NEC, Electronics and electric products
Sumitomo Realty & Development Co., Ltd., Real estate
Sumitomo Osaka Cement Co., Ltd., Cement
Mitsubishi UFJ Securities
Nikon Corporation
Nippon Oil Corporation
NYK Line (Nippon Yusen Kabushiki Kaisha)
P.S. Mitsubishi Construction Co., Ltd.
Tokio Marine & Nichido Fire Insurance Co., Ltd.
三菱汽车工业股份有限公司(Mitsubishi Motors Corporation)
三菱重工业股份有限公司(Mitsubishi Heavy Industries, Ltd.)
三菱树脂股份有限公司(Mitsubishi Plastics, Inc.)
三菱商事股份有限公司(Mitsubishi Corporation)
Mitsubishi Logistics Corporation
Mitsubishi Motors (Automobile manufacturing and sales)
Mitsubishi Paper Mills, Ltd.
Mitsubishi Plastics, Inc.
Mitsubishi Rayon Co., Ltd.
Mitsubishi Economic Research Institute
The Mitsubishi Foundation
Mitsubishi Kinyokai