Declining rates of high school graduates since 1992 in Japan are beginning to seriously challenge the financial resources of private universities which rely heavily on student tuition. The purpose of this paper is to cast light on the management of private universities in Japan by clarifying their financial structures.
Using data from the Survey of Financial Conditions of Private Schools for fiscal year 1996, we investigate the financial affairs of private universities and 2-year colleges in Japan. The main findings of this paper are that revenue income (which includes tuition fees, gifts, and endowment) is influenced by market conditions such as prestige, tradition, and location and second, though the balance between revenue and expenditures is partly affected by market conditions, it is determined much more by institutional factors such as faculty salaries and studentteacher ratios.
Based on this empirical analysis, we suggest four options to maintain equilibrium between revenue and expenditures that individual institutions can take into account with their market conditions.