Japanese horizontal keiretsu and the performance implications of membership

Takehiko Isobe, Shige Makino, Anthony Goerzen

Research output: Contribution to journalArticle

21 Citations (Scopus)

Abstract

Our study investigates the effect of Japanese horizontal keiretsu group membership on firm risk and return. Like prior studies, our results show that horizontal keiretsu membership has a negative effect on firm profitability. However, we find that horizontal keiretsu networks are likely to increase the gap between targeted and realized returns, which we call the outcome-aspiration gap. Moreover, in contrast to prior studies, our results indicate that keiretsu membership does not enable member firms to reduce risks by smoothing profitability. Instead, our findings provide evidence that is counter to the conventional notion that Japanese horizontal keiretsu allows their member firms to trade off profits for reduced risk.

Original languageEnglish
Pages (from-to)453-466
Number of pages14
JournalAsia Pacific Journal of Management
Volume23
Issue number4
DOIs
Publication statusPublished - 2006 Dec
Externally publishedYes

Fingerprint

Keiretsu
Trade-offs
Profitability
Firm risk
Firm profitability
Smoothing
Profit
Group membership
Aspiration
Risk and return

Keywords

  • Horizontal keiretsu
  • Performance
  • Risk sharing

ASJC Scopus subject areas

  • Business, Management and Accounting (miscellaneous)
  • Economics, Econometrics and Finance (miscellaneous)
  • Business and International Management

Cite this

Japanese horizontal keiretsu and the performance implications of membership. / Isobe, Takehiko; Makino, Shige; Goerzen, Anthony.

In: Asia Pacific Journal of Management, Vol. 23, No. 4, 12.2006, p. 453-466.

Research output: Contribution to journalArticle

@article{d644fcaf52014dbfb55b979403096c70,
title = "Japanese horizontal keiretsu and the performance implications of membership",
abstract = "Our study investigates the effect of Japanese horizontal keiretsu group membership on firm risk and return. Like prior studies, our results show that horizontal keiretsu membership has a negative effect on firm profitability. However, we find that horizontal keiretsu networks are likely to increase the gap between targeted and realized returns, which we call the outcome-aspiration gap. Moreover, in contrast to prior studies, our results indicate that keiretsu membership does not enable member firms to reduce risks by smoothing profitability. Instead, our findings provide evidence that is counter to the conventional notion that Japanese horizontal keiretsu allows their member firms to trade off profits for reduced risk.",
keywords = "Horizontal keiretsu, Performance, Risk sharing",
author = "Takehiko Isobe and Shige Makino and Anthony Goerzen",
year = "2006",
month = "12",
doi = "10.1007/s10490-006-9015-2",
language = "English",
volume = "23",
pages = "453--466",
journal = "Asia Pacific Journal of Management",
issn = "0217-4561",
publisher = "Springer New York",
number = "4",

}

TY - JOUR

T1 - Japanese horizontal keiretsu and the performance implications of membership

AU - Isobe, Takehiko

AU - Makino, Shige

AU - Goerzen, Anthony

PY - 2006/12

Y1 - 2006/12

N2 - Our study investigates the effect of Japanese horizontal keiretsu group membership on firm risk and return. Like prior studies, our results show that horizontal keiretsu membership has a negative effect on firm profitability. However, we find that horizontal keiretsu networks are likely to increase the gap between targeted and realized returns, which we call the outcome-aspiration gap. Moreover, in contrast to prior studies, our results indicate that keiretsu membership does not enable member firms to reduce risks by smoothing profitability. Instead, our findings provide evidence that is counter to the conventional notion that Japanese horizontal keiretsu allows their member firms to trade off profits for reduced risk.

AB - Our study investigates the effect of Japanese horizontal keiretsu group membership on firm risk and return. Like prior studies, our results show that horizontal keiretsu membership has a negative effect on firm profitability. However, we find that horizontal keiretsu networks are likely to increase the gap between targeted and realized returns, which we call the outcome-aspiration gap. Moreover, in contrast to prior studies, our results indicate that keiretsu membership does not enable member firms to reduce risks by smoothing profitability. Instead, our findings provide evidence that is counter to the conventional notion that Japanese horizontal keiretsu allows their member firms to trade off profits for reduced risk.

KW - Horizontal keiretsu

KW - Performance

KW - Risk sharing

UR - http://www.scopus.com/inward/record.url?scp=33845989843&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=33845989843&partnerID=8YFLogxK

U2 - 10.1007/s10490-006-9015-2

DO - 10.1007/s10490-006-9015-2

M3 - Article

VL - 23

SP - 453

EP - 466

JO - Asia Pacific Journal of Management

JF - Asia Pacific Journal of Management

SN - 0217-4561

IS - 4

ER -