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Identifier to cite or link to this item: https://hdl.handle.net/10086/13895

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Title
Asset Price Shocks, Financial Constraints, and Investment: Evidence from Japan
Creator
Creator Name
Goyal, Vidhan K. Goyal, Vidhan K.
Affiliation
Affiliation Name
Hong Kong University of Science & Technology
Creator Name
Yamada, Takeshi Yamada, Takeshi
ヤマダ, タケシ ヤマダ, タケシ
Affiliation
Affiliation Name
Hong Kong University of Science & Technology
Editor
Contributor Name
Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University
Key Word
Investment
liquidity
asset inflation
Japan
JEL
G31
G32
Abstract
This paper examines investment spending of Japanese firms around the "asset price bubble" in the late-1980s and makes three contributions to our understanding of how stock valuations affect investment. First, corporate investment responds significantly to nonfundamental components of stock valuations during asset price shocks; fundamentals matter less. Clearly, the stock market is not a 'sideshow'. Second, the time series variation in the sensitivity of investment to cash flow is affected more by changes in monetary policy than by shifts in collateral values. Finally, asset price shocks primarily affect firms that rely more on bank financing, and not necessarily those that use equity markets for financing. Only the investment of bank-dependent firms responds to nonfundamental valuations. In addition, the cash flow sensitivity of bank-dependent firms with large collateral assets decreases when asset prices become inflated, but increases dramatically when asset prices collapse and monetary policy tightens.
Description
June 2001
Publisher
Institute of Economic Research, Hitotsubashi University
Issued Date
2002-09
Language
English(eng)
Resource Type
technical report
Version Type
VoR
Is Part OfRelation -
Related Title
CEI Working Paper Series ; No. 2002-11
Relation
Related Identifier
URI
  http://cei.ier.hit-u.ac.jp/index.html
NCID
AA11590659
Number of Pages
48
Appears in Collections
CEI Working Paper Series
URL
https://hdl.handle.net/10086/13895