The Impact of Governance Structure on Firm Performance: Evidence from Japanese Local Mixed Enterprises

In Japan, many local mixed enterprises owned and operated jointly by local governments and private sectors had been established from the late 1980’s to the early 1990’s in order to provide public services more efficiently. At present, in Japan, many local mixed enterprises are confronted with a serial fiscal crisis. In 2007, the national government enacted the Local Public Finance Reconstruction Law and started to lead local mixed enterprises and local governments to achieve fiscal soundness. In addition to local governments, mixed enterprises have to make an effort to operate more efficiently. However, we believe that local mixed enterprises lack the incentives to manage more efficiently because of the governance structure. Firstly, as local mixed enterprises are owned by local governments, they can procure government-guaranteed funds and are able to raise capital more easily. Also, if business conditions of enterprises worsen, local governments give subsidies to bail out ailing enterprises. Managers do not have to worry about going bankrupt and might continue to carry out inefficient projects. Secondly, if managers are from local governments, or if the majority of the board members are local government officials, they might supply services without putting stress on profit. Therefore, it is possible that the governance structure of local mixed enterprises is the important factor that determines their performance. In this paper, we study the link between the performance and the governance structure in local mixed enterprises.

Productivity Effects and Determinants of the Allocation of Public Infrastructure

Inefficient use of public money is a policy issue of concern in Japan. Some contend that spending towards the formation of public capital does not promote economic growth, one reason being that such investment is concentrated in underdeveloped regions which have a low impact on the growth of economic activity. Investment in underdeveloped regions might be the result of political misallocation or simply the fact that public capital no longer contributes to private productivity. Our study addresses these two important issues: whether or not public infrastructure contributes to production in the private sector, and whether or not political factors really affect the allocation of public infrastructure investment. If the political factors indeed affect allocation, what kinds of political factors are the most deterministic? First, we survey studies on this topic published since the 1970s. For methodology, we plan to take a simultaneous approach to examine these issues. Second, because some data are not publicly available, we construct a data set of public infrastructure and related variables. Public capital in this study is limited to public infrastructure such as roads, ports, airports, banks and dams. Railroads and electric power plants are excluded because these were built by the private sector in Japan. In this study, we plan to use a panel data set covering 46 prefectures and 9 time periods for every 5 years from 1955 to 1995 in Japan. Therefore, the total sample size in this study is 414. Third, after constructing the data set, we overview the regional distribution of public infrastructure and the relationship between public infrastructure allocation and political factors. Last, we estimate simultaneous equations regarding regional production function, infrastructure investment function and grant allocation function. By using these estimated functions, we evaluate whether or not public capital contributes to production and what kind of political factors affect the allocation of public infrastructure investment.

What Type of Public Capital Contributes to Private Production?

The main purpose of this study is to determine whether public capital contributes to productivity growth and, if so, what kind of public capital contributes most. We analyze a dataset of 46 prefectures in Japan over 41 years, from 1955 to 1995, and estimate the production function as the first-differenced form. In the case where analysis was conducted using aggregate public capital, public capital shows a positive contribution to private production. However, we could find no clear productivity effects when using smaller components of public capital. Key Words: Public Capital, Productivity Effect, Infrastructure, Spill-over Effect JEL: Classification H50, H54, R53

Cost Efficiency in Japanese Local Governments: the Economic Effect of Information Technology in Japanese Local Governments

Due to the current fiscal crisis faced by many Japanese local governments, we decided to conduct research to assist local governments in reducing costs, by reviewing previous studies, as well as investigate the factors affecting wasteful expenditure. Therefore, the purpose of this paper is to analyze the efficiency of local governments in Japan, applying an econometric technique. Further, we calculate indices of cost efficiency using the stochastic cost frontier method. For the purpose of this research we have focused specifically on city areas of municipal governments to examine whether or not information technology contributes to cost efficiency. The hypotheses that we tested were whether or not, the use of information technology equipment and outsourcing of information technology operations by local governments would result in greater cost efficiency. The results show that outsourcing information technology operations increases cost efficiency

Productivity Effects and Determinants of the Allocation of Public Infrastructure

Inefficient use of public money is a policy issue of concern in Japan. Some contend that spending towards the formation of public capital does not promote economic growth, one reason being that such investment is concentrated in underdeveloped regions which have a low impact on the growth of economic activity. Investment in underdeveloped regions might be the result of political misallocation or simply the fact that public capital no longer contributes to private productivity. Our study addresses these two important issues: whether or not public infrastructure contributes to production in the private sector, and whether or not political factors really affect the allocation of public infrastructure investment. If the political factors indeed affect allocation, what kinds of political factors are the most deterministic? First, we survey studies on this topic published since the 1970s. For methodology, we plan to take a simultaneous approach to examine these issues. Second, because some data are not publicly available, we construct a data set of public infrastructure and related variables. Public capital in this study is limited to public infrastructure such as roads, ports, airports, banks and dams. Railroads and electric power plants are excluded because these were built by the private sector in Japan. In this study, we plan to use a panel data set covering 46 prefectures and 9 time periods for every 5 years from 1955 to 1995 in Japan. Therefore, the total sample size in this study is 414. Third, after constructing the data set, we overview the regional distribution of public infrastructure and the relationship between public infrastructure allocation and political factors. Last, we estimate simultaneous equations regarding regional production function, infrastructure investment function and grant allocation function. By using these estimated functions, we evaluate whether or not public capital contributes to production and what kind of political factors affect the allocation of public infrastructure investment

The Impact of Governance Structure on Firm Performance: Evidence from Japanese Local Mixed Enterprises

In Japan, many local mixed enterprises owned and operated jointly by local governments and private sectors had been established from the late 1980's to the early 1990's in order to provide public services more efficiently. At present, in Japan, many local mixed enterprises are confronted with a serial fiscal crisis. In 2007, the national government enacted the Local Public Finance Reconstruction Law and started to lead local mixed enterprises and local governments to achieve fiscal soundness. In addition to local governments, mixed enterprises have to make an effort to operate more efficiently. However, we believe that local mixed enterprises lack the incentives to manage more efficiently because of the governance structure. Firstly, as local mixed enterprises are owned by local governments, they can procure government-guaranteed funds and are able to raise capital more easily. Also, if business conditions of enterprises worsen, local governments give subsidies to bail out ailing enterprises. Managers do not have to worry about going bankrupt and might continue to carry out inefficient projects. Secondly, if managers are from local governments, or if the majority of the board members are local government officials, they might supply services without putting stress on profit. Therefore, it is possible that the governance structure of local mixed enterprises is the important factor that determines their performance. In this paper, we study the link between the performance and the governance structure in local mixed enterprises

What Type of Public Capital Contributes to Private Production?

The main purpose of this study is to determine whether public capital contributes to productivity growth and, if so, what kind of public capital contributes most. We analyze a dataset of 46 prefectures in Japan over 41 years, from 1955 to 1995, and estimate the production function as the first-differenced form. In the case where analysis was conducted using aggregate public capital, public capital shows a positive contribution to private production. However, we could find no clear productivity effects when using smaller components of public capital. Key Words: Public Capital, Productivity Effect, Infrastructure, Spill-over Effect JEL: Classification H50, H54, R5

An Analysis of the Effects of the Compact City on Economic Activities in Japan

The main purpose of this paper is to evaluate how the form and urban policies of ga compact cityh affect its economic activities. In general, bigger cities have more advantages such as agglomeration economies, but too-big cities have the disadvantages of external diseconomies such as environmental pollution and traffic congestion. Therefore, governments of industrial countries have an interest in promoting compact cities, but empirical evidence regarding how the formation and policies of compact cities affect economic activities is unclear or undocumented. In order to investigate our research question, we will conduct an empirical analysis using data from Japanese cities. As there is no official definition in Japan, we first define metropolitan areas and create a data set of 269 metropolitan areas in Japan for the year 2000. Then we estimate citiesf urban economic models by using econometric techniques. These urban economic models consist of four sections: 1) a compact city section, 2) a labor section, 3) a production section, and 4) a population section. First, the compact city section shows how the cityfs compactness measure is determined. Second, the labor section shows how the numbers of employees, the share of each industryfs employees, and so on are determined. There are 11 industries defined here, including manufacturing, public utilities, retailers, wholesalers, and so on. Third, by estimating the production function, the production section shows the extent of each industryfs economic activity in a city. The production functions estimated here are for 11 industries. Last, the population section shows how the cityfs population is determined by considering degree of economic activities, amenities, and so on. After we estimate several formulas regarding the above issues, we will conduct simulations in order to evaluate how the degree of a cityfs compactness affects economic activities and number of employees in a city. We are also able to determine what kind of factors affect the degree of a cityfs compactness. These empirical results may also be useful in determining policy aimed a achieving a sustainable city size

Quadrupole moments in chiral material DyFe3(BO3)4 observed by resonant x-ray diffraction

By means of circularly polarized x-ray beam at Dy L3 and Fe K absorption edges, the chiral structure of the electric quadrupole was investigated for a single crystal of DyFe3(BO3)4 in which both Dy and Fe ions are arranged in spiral manners. The integrated intensity of the resonant x- ray diffraction of space-group forbidden reflections 004 and 005 is interpreted within the electric dipole transitions from Dy 2p3 to 5d and Fe 1s to 4p, respectively. We have confirmed that the 2 handedness of the crystal observed at Dy L3 and Fe K edges is consistent with that observed at Dy M5 edge in the previous study. By analyzing the azimuth scans of the diffracted intensity, the electronic quadrupole moments of Dy 5d and Fe 4p are derived. The temperature profiles of the integrated intensity of 004 at the Dy L3 and the Fe K edges are similar to those of Dy-O and Fe-O bond lengths, while that at the Dy M5 edge does not. The results indicate that the helix chiral orientations of quadrupole moments due to Dy 5d and Fe 4p electrons are more strongly affected by the crystal fields than Dy 4f