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INTERNAL CAPITAL MARKETS AND BANK RELATIONSHIP - EVIDENCE FROM JAPANESE CORPORATE SPIN-OFFS.INTERNAL CAPITAL MARKETS, INVESTMENT, AND BANK RELATIONSHIP - EVIDENCE FROM JAPANESE CORPORATE SPIN-OFFS.

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Date Issued:
2005
Abstract/Description:
This dissertation consists of two studies related to internal capital markets and bank relationship using Japanese corporate spin-offs. The first study analyzes the relation between internal capital markets and banks by examining 137 Japanese corporate spin-offs created between the years 2001 and 2003 (since the establishment of new spin-offs law in 2001). In a univariate analysis, we find significant positive average cumulative abnormal returns around the announcements, market-adjusted excess returns after the spin-offs, an increase of the Herfindahl index, and a reduction in the diversification discount after the spin-offs. In a cross-sectional analysis, we find that bank-related governance variables such as the keiretsu-affiliation indicator, bank loan to total asset ratio, main bank ownership, and indicator variable of the existence of a bank-appointed director on the board indicator variables are significantly positively related to cumulative average abnormal returns around the announcements, market-adjusted excess returns after the spin-offs, an increase in focus of firms in terms of the Herfindahl index, and a reduction in the diversification discount. Therefore, we conclude that there is a significant relationship between internal capital markets and banks in Japan; after the internal capital market reorganization through spin-offs the closer relationship with banks creates shareholder wealth and increases the focus of firms. This paper is now co-authored with Professor Yoon K. Choi. The second study analyzes the investment policy changes in internal capital markets and the effect of banks' monitoring on the investment changes using Japanese corporate spin-offs, including merger-facilitated spin-offs within conglomerates. We find that investment sensitivity increases significantly after internal restructuring through spin-offs, consistent with Gertner et al. (2002). Furthermore, our results show that bank-related spin-offs' investments are more sensitive to investment opportunities, Tobin's Q, after being spun off. This suggests that the efficiency of Japanese internal capital markets has increased through spin-offs after the financial deregulation in 2001. We conclude that banks seem to play significant monitoring roles in internal capital markets to increase the investment efficiency after spin-offs. This paper is now co-authored with Professor Yoon K. Choi.
Title: INTERNAL CAPITAL MARKETS AND BANK RELATIONSHIP - EVIDENCE FROM JAPANESE CORPORATE SPIN-OFFS.INTERNAL CAPITAL MARKETS, INVESTMENT, AND BANK RELATIONSHIP - EVIDENCE FROM JAPANESE CORPORATE SPIN-OFFS.
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Name(s): Han, Seung, Author
Choi, Yoon, Committee Chair
University of Central Florida, Degree Grantor
Type of Resource: text
Date Issued: 2005
Publisher: University of Central Florida
Language(s): English
Abstract/Description: This dissertation consists of two studies related to internal capital markets and bank relationship using Japanese corporate spin-offs. The first study analyzes the relation between internal capital markets and banks by examining 137 Japanese corporate spin-offs created between the years 2001 and 2003 (since the establishment of new spin-offs law in 2001). In a univariate analysis, we find significant positive average cumulative abnormal returns around the announcements, market-adjusted excess returns after the spin-offs, an increase of the Herfindahl index, and a reduction in the diversification discount after the spin-offs. In a cross-sectional analysis, we find that bank-related governance variables such as the keiretsu-affiliation indicator, bank loan to total asset ratio, main bank ownership, and indicator variable of the existence of a bank-appointed director on the board indicator variables are significantly positively related to cumulative average abnormal returns around the announcements, market-adjusted excess returns after the spin-offs, an increase in focus of firms in terms of the Herfindahl index, and a reduction in the diversification discount. Therefore, we conclude that there is a significant relationship between internal capital markets and banks in Japan; after the internal capital market reorganization through spin-offs the closer relationship with banks creates shareholder wealth and increases the focus of firms. This paper is now co-authored with Professor Yoon K. Choi. The second study analyzes the investment policy changes in internal capital markets and the effect of banks' monitoring on the investment changes using Japanese corporate spin-offs, including merger-facilitated spin-offs within conglomerates. We find that investment sensitivity increases significantly after internal restructuring through spin-offs, consistent with Gertner et al. (2002). Furthermore, our results show that bank-related spin-offs' investments are more sensitive to investment opportunities, Tobin's Q, after being spun off. This suggests that the efficiency of Japanese internal capital markets has increased through spin-offs after the financial deregulation in 2001. We conclude that banks seem to play significant monitoring roles in internal capital markets to increase the investment efficiency after spin-offs. This paper is now co-authored with Professor Yoon K. Choi.
Identifier: CFE0000849 (IID), ucf:46644 (fedora)
Note(s): 2005-12-01
Ph.D.
Business Administration, Department of Finance
Doctorate
This record was generated from author submitted information.
Subject(s): Internal Capital Markets
Spin-offs
Keiretsu
and Main Bank
Persistent Link to This Record: http://purl.flvc.org/ucf/fd/CFE0000849
Restrictions on Access: campus 2006-01-31
Host Institution: UCF

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