Kooyul Jung
Korea Advanced Institute of Science and Technology
Edward B Douthett
George Mason University
Wikil Kwak
University of Nebraska at Omaha
Abstract: This paper examines differences in forecast characteristics between keiretsu and non-keiretsu firms. Japanese industrial organization is characterized by enterprise groupings, keiretsu, composed of firms in different industries, but interrelated through cross holdings of ownership. The interrelations of the Japanese keiretsu could increase the monitoring of managerial performance, or the exclusionary environment within a keiretsu could create an information monopoly resulting in information asymmetry between inside and outside shareholders. Increased monitoring will improve forecast characteristics while the opposite is true under information monopoly.
Our results suggest that forecast accuracy (dispersion) is higher (lower) for keiretsu firms than non-keiretsu firms, supporting a monitoring role by the keiretsu. The results also show that the keiretsu firmsÂ’ forecast characteristics are related to the strength of the keiretsu relationship, providing further evidence that it is indeed the keiretsu relationship that increases the monitoring of management, which ultimately improves forecast accuracy and dispersion.
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