Japanese capital structure and

TABLE OF CONTENTS INTRODUCTION         Capital expression in japan has been noted to be more(prenominal) highly leveraged than comparative conglutination American firms which brings to mind the question: how is it that Japanese firms have been fit to take on such high levels of debt? The answer lies in the environment that Japanese firms have been operating in. More specifically, the levels of debt atomic number 18 likely to have been induced by the lack of resource sources of pay because of the effect of government regulations, and the different ownership structure in Japanese firms (with institutional lenders being major honor holders). So, the higher leverage has been a consequence of the conditions that Japanese bloodline facewith a more pronounced effect (due to relationships) in companies which are in corporate groups known as keiretsu. These conditions were trace of the past.

        As the benefits of debt are well known in finance theory (tax shields, signaling etc.), the lack of independence and efficiency in decision making borne by Japanese managers seem to be the costs. The result for some firms has been a reduction in debt levels to those more resembling U.S. companies. The questions now have become: What is the optimal debt level for a Japanese firm? Should firms still be taking payoff of the benefits of their keiretsu relationship that have allowed them to take on such levels of debt?



Our analysis focuses on Mitsubishi Corporation, a core conglomerate that is part of the bigger Mitsubishi Group keiretsu having the superior structure characteristics mentioned above. The report will first off explore the circumstances that may have induced Mitsubishi to its throw capital structure, then look at more novel events and trends that may affect future financing decisions, and conclude with the Mitsubishi capital structure/optimum debt level analysis.

KEIRETSU AND THE JAPANESE CORPORATION Japanese corporations have outpaced...

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