Jump to Navigation

Ulrike Schaede's Research Featured in The Economist

Amid the zombies are a handful of zesty businesses

02/10/2011
The Economist

ZOMBIES still stalk Japan’s corporate landscape. These barely profitable companies, propped up by cheap bank loans, include railways that expanded into property and retailing, like Kintetsu. It offers a microscopic return on assets of 0.2%. “These things are quivering heaps of excess baggage,” sighs Peter Fuchs, an independent equities analyst. Yet because they are stuffed with debt that they pay off with steady cashflow, banks love them.

The zombies make Japanese business look comedic. Around two-thirds of all Japanese firms do not earn a profit (at least for tax purposes). More than a quarter of companies on the Tokyo Stock Exchange had operating margins below 2% over the past decade. Bosses complain that younger executives lack assertiveness; the media grouse about unambitious “grass-eating men”. Even the governor of the Bank of Japan, Masaaki Shirakawa, acknowledges that the country’s near-zero interest rates undermine corporate performance.

However, there is a more optimistic facet of corporate Japan—a large cohort of super-performers. These well-managed companies with excellent technology have impressive returns. Some 7% of Japanese manufacturers have profit margins of more than 15%, according to a new study* by Ulrike Schaede of the University of California, San Diego. And they play a substantial role in the economy: a quarter of firms account for almost half of all manufacturing profits.

Click here to read the full article.

Related Links

Professor Schaede is an authority on Japanese business organization, strategy, and management. In addition to analyzing the recent shift away from diversification to focused, lean organizations among Japan's leading companies, Schaede's research also includes the newly emerging takeover market in Japan, venture capital and startups, as well as changing employment practices. Previous research has addressed regulation and government-business relationships in Japan; financial markets; corporate governance; welfare policies and small-sized companies in a changing Japan; and the role of trade associations and antitrust policy.

Back to Top