Japanese Capital Structure and an Analysis of Mitsubishi Corporation
Capital structure in Japan has been noted to be more highly leveraged than comparative North American firms which brings to mind the question: how is it that Japanese firms have been able 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 are likely to have been induced by the lack of alternative sources of finance because of the effect of government regulations, and the different ownership structure in Japanese firms (with institutional lenders being major equity holders). So, the higher leverage has been a consequence of the conditions that Japanese business face—with a more pronounced effect (due to relationships) in companies which are in corporate groups known as keiretsu. These conditions were characteristic 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
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Some common words found in the essay are:
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Approximate Word count = 5060
Approximate Pages = 20 (250 words per page double spaced)
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