Investment and financing decisions of the corporation

Abstract

The main purpose of the present study is to contribute
 towards a systematic investigation of the financial behaviour of
 corporations in a growing capitalist economy. The present study
 follows a simplified, fundamental approach to an understanding of
 the subject.
 While the thesis puts the special emphasis on the empirical
 study in Part II, the chapters in Part I on methodological and
 epistemological discussions are not less important from the standpoint
 of the well-balanced trilogy of methodology, theory, and
 verification in empirical sciences. In Part II, no explicit
 assumptions are made on markets and investors, because these assumptions
 seem fragile, particularly in explaining the dynamic behaviour
 of corporations in a disequilibrium context. Part II is a factfinding
 part whose major aim is to obtain meaningful results free from
 popular views and textbook analyses.
 The purpose of Part I is to clarify the epistemological and
 methodological stance of the thesis. The aim of Chapter 2 is in
 gaining a general idea on crucial points of scientific methodologies
 recently developed ln the field of philosophy of science when applied
 to the explanation of the history and structure of economic theory.
 Chapter 3 surveys the literature with an intention of making the position of the thesis clear. It contains a critical look at the neoclassical
 theory of the firm and the theory of finance, and a review
 of recent contributions to a better understanding of the market and
 the firm. Further comments on epistemological issues are given in
 Chapter 4. The purpose is not to construct a coherent methodology but
 to present and arrange different ways of economic thinking, e.g., the
 neoclassical paradigm, fundamentalist Keynesians arid ,Veblertism. Part II is devoted to the empirical study of the financial
 behaviour of corporations ln a growing capitalist economy. Chapter
 5 takes up some institutional problems which may be relevant to the
 subsequent chapters. The analysis is confined to Japanese corporations,
 because the dynamic financial behaviour of the corporation in a disequilibrium
 context can be best described by that of Japanese corporations
 since World War II and they may have been significantly affected by some
 insitutional factors. Chapter 6, i~ turn, attempts to verify the
 validity of several alternative models in explaining the financial
 behaviour of Japanese manufacturing corporations under the rapid
 economic growth period. Chapter 7 shifts to a study of the changing
 pattern of the Japanese individual investors with a special reference
 to their degree of involvement in the stock market. The purpose of
 the chapter is to examine which financial variables as well as some
 institutional regulations are considered to be the most significant
 factors affecting the changing pattern of Japanese individual investors.
 Finally, Chapter 8 attempts to derive meaningful proporitions concerning
 the structural characteristics of the financial behaviour of Japanese corporations based upon an approach somewhat different from
 standard econometric techniques . To be consistent as much as possible
 with the epistemological stance enunciated in Part I, the approach
 should be descriptive, inductive, objective, and positive rather than
 mathematical, deductive, subjective, and normative. The main results
 are summarised as propositions concerning the financial behaviour of
 Japanese corporations some of which may be compatible with the results
 in the foregoing chapters.
 The thesis does not intend to be a clear exposition taking
 account of every relevant descriptive aspect of non-neoclassical
 economics, e.g., post-Keynesian approach, while the epistemological
 stance of the thesis may be said to be closer to that of Keynes than
 to that of the orthodox neoclassical school . For example, as seen
 in Part II, the thesis does not treat explicitly the relationship
 between uncertainty, disequilibrium and dynamics in developing
 -
 empirical analyses. Satisfactory methodology in this area seems not
 to have been available yet, although some insight is given below .
 The style in Part I is somewhat exegetical reflecting this situation.