1998 Volume 6 Issue 2 Pages 75-91
Through Tentou-koukai, companies have access to significant liquidity from the capital market, which can be used for the company’s growth. Because companies’-names will be more familiar in the market and their credibility will grow after Tentou-koukai, such companies should be able to enhance their growth and hire good human resources after Tentou-koukai. Therefore, such companies should be more profitable and grow after Tentou-koukai by taking advantage of increased liquidity from the capital market and good human resources. In fact, companies usually have been growing before Tentou-koukai. However, do companies continue the growth trend and sustain high profitability after Tentou-koukai? It is important to know the effects of Tentou-koukai with respect to companies considering Tentou-koukai and to analyze the results after Tentou-koukai.
In this article, we will show the effect of Tentou-koukai towards companies’profitability by analyzing various financial data before and after Tentou-koukai. We investigated 321 companies that conducted Tentou-koukai from 1986 to 1991. We analyzed their financial data 5 years before and after Tentou-koukai and examined the difference in profitability. The data shows that profitability decreases after Tentou-koukai. The reason for the decrease in profitability is primarily high depreciation resulting from high post-Tentou-koukai investments in fixed assets. This tendency of decreasing profitability after Tentou-koukai is more significant for manufacturers compared with than non-manufacturers. However, decreasing cash flow is more significant for non-manufacturers.
