Leiden University Student Repository

Wit, Ties de (2020)

An examination of the high excess cash reserves of Japanese firms

Bachelor thesis | Japanstudies (BA)

This thesis aims to explain why the cash reserves of Japanese firms have almost tripled in the years between 2013 and 2019, during a time where neoliberal policy reform should have encouraged spending excess cash on extra investing. By combining a study of already existing literature on how these policy changes should have affected firms and a case study on how Japanese firms have actually reacted to the reforms, it becomes clear that they did not have the expected results. Investments are down and cash reserves keep going up. With the use of the theory of path dependency, this phenomenon can be explained. Traditional Japanese firms have a tendency to be more conservative and tend to be focussed on long term growth. While the business environment has significantly changed, the structure and institutions of the firms have stayed the same. Easier access to financial capital and lower interest rates have increased profits, but they have not changed the firm’s investment strategies....Show moreThis thesis aims to explain why the cash reserves of Japanese firms have almost tripled in the years between 2013 and 2019, during a time where neoliberal policy reform should have encouraged spending excess cash on extra investing. By combining a study of already existing literature on how these policy changes should have affected firms and a case study on how Japanese firms have actually reacted to the reforms, it becomes clear that they did not have the expected results. Investments are down and cash reserves keep going up. With the use of the theory of path dependency, this phenomenon can be explained. Traditional Japanese firms have a tendency to be more conservative and tend to be focussed on long term growth. While the business environment has significantly changed, the structure and institutions of the firms have stayed the same. Easier access to financial capital and lower interest rates have increased profits, but they have not changed the firm’s investment strategies. Instead the new earned profits have been assigned to the cash reserves for later use.Show less

Cash reserves

Abenomics

Neoliberalism

Cash flow sensitivity

Agency theory

Author

Wit, Ties de

Faculty

Faculty of Humanities

Specialisation

BA Japanstudies

Supervisors

Shibata, Saori

ECTS Credits

10

Language

en