JP Corporate Flashcards
(12 cards)
cost of equity
the rate of return an investor requires from an investment for it to be considered worth the risk
hurdle rate
the minimum rate of return a project must achieve to be accepted. riskier projects have higher hurdle rates
payback period
the number of years it takes to recover the investment in a business
technique in capital budgeting in JP
Japanese firms have a “payback syndrome” or use payback method usually. They don’t usually use NPV and IRR.
keiretsu 系列
a set of companies with interlocking business relationships where each own a small portion of each other’s shares.
main bank system
the largest provider of loans to a company is linked in many ways. monitoring the firm, a major shareholder, sends employees as directors, tries to rescue it
How did the new economic environment change JP companies?
It led more and more banks & companies away from 系率 arrangements.
Law changes gave more managerial flexibility and broader shareholder powers, hence many changes in corporate governance.
How was corporate strategy during post-war?
They were directed towards stability, and longevity. To match more aggressive investments.
Profits were not the main concern. It’s about the higher certainty of survival.
Post-war what was the threat to companies?
Not competition. It’s the exposure to risk/failure. And so they get stable relationships with banks & partners for protection (系列)
What can main banks do?
They hold up to 5% of ownership. They provide easy access to funds. They can interfere with the mgt in exchange for exposure.
In the 1990s, what changed the post-war schemes?
- Change in industrial policy
- 1997 crisis proved that regulation was inadequate.
Post-1990s, how did banks change?
Being a main bank was not sufficient, and they sought for broader ranger of customers.
New law required more bank stability, so banks sold off their cross-held shares.
