村瀬 英彰

This paper empirically investigates how ownership structure of Japanese firms affects the risk-return profiles of their stocks. We find significant relationships between ownership and firms' operational performance, i.e., the ownership of financial institutions is associated with poor performance while the ownership of large shareholders is associated with the opposite. However, comparing the returns on portfolios sorted by ownership, we find no significant relationships between ownership and the rates of returns. Specifically, excess returns are insignificant after controlling for three risk factors (i.e., market, size, and value) while factor loadings are significantly different across portfolios, i.e., the ownership of financial institutions is associated with low-risk, low-return portfolios while the ownership of large shareholders is associated with the opposite.

Our knowledge about how the economy works is far froth perfect. Hence aggressive policies without solid economics foundations may suffer from large uncertainty in their outcomes. However, it has been often observed that such blind policy-making, sometimes called as"Voodoo Economics", attracts strong political support in real politics. On the one hand, why do politicians adopt such risky policies? On the other hand, why do voters prefer such risky politicians? While it is usually argued that the popularity of"Voodoo Economics"stems from voters' irrationality or their lack of economics knowledge, this paper offers an alternative rational explanation. Specifically, it is shown that, in the presence of electoral competition, the adoption of risky policies can be a signal of politicians' confidence in their high ability and, if the benefits of ability outweigh the costs of uncertainty, voters actually prefer risky politicians. Meanwhile, given this preference of voters, politicians willingly adopt risky policies in order to win office. It is also shown that, under this signaling mechanism, an increase in the number of politicians participating in electoral competition may harm voters since it strengthens politicians' incentives for taking risk, i.e., stiffer electoral competition can exacerbate rather than alleviate the problem.

In democracies, ideological politicians often win elections. This phenomenon contradicts the Median Voter Theorem. I propose a model of election to explain this puzzle. Ideology can be a signal of ability, and if the benefits of ability outweigh the costs of ideology the electorate will prefer ideological politicians. Meanwhile, politicians disguise their ideology even if such disguise is costly. Under certain conditions, the most extreme politician is the most likely to be elected. Further, stiffer electoral competition can harm the electorate. These results contrast sharply with the standard belief that politicians' desire to gain office leads to their ideological convergence.

This paper investigates the theory of land price formation, taking into consideration the fact that an "option" is implicitly attached to land. Using a theoretical model, it tries to explain the land price bubbles in Japan in the late 1980s as the result of investors' expectations of alternative uses of the land. The model is estimated and validated using data on the Tokyo metropolitan residential area. The modelling exercise also determines the extent to which the option contributes to the formation of land prices. It is shown that the separation of the land price from its fundamental value can be satisfactorily explained by the option property of land. JEL Classification Numbers: C53, G12, R14.

This paper empirically analyzes the relationship between ownership structure and the determination of managers' bonuses in Japanese firms. In the analysis, we obtain two notable findings. First, equity ownership by non-financial corporations increases the sensitivity of managers' bonuses to firms' profits. Second, equity ownership by financial institutions increases the magnitude of bonus cuts in times of firms' distress. These findings suggest that cross shareholdings effectively transfer residual claims from shareholders to managers. They also suggest that, when firms are performing badly, financial institutions intervene in management and deprive managers of residual claims. Our empirical results imply the existence of two complementary managerial incentive mechanisms in Japan, which may substitute for external takeover threats. (C) 1998 Elsevier Science B.V.