BLOCK HOLDING AND KEIRETSU IN JAPAN - THE EFFECTS OF CAPITAL-MARKETS LIBERALIZATION MEASURES ON THE STOCK-MARKET

Long-term block holding among large industrial corporations and financ ial institutions is prevalent in Japan. Little is known about the impl ications of such business practice on portfolio returns. We document t he portfolio relationships of parent firms, sub firms and specific ind ustry portfolios and we hypothesize that these relationships have chan ged substantially in Japan. Using certain measures for evaluating port folios and mean-variance spanning, we test the hypothesis. Our empiric al results suggest that market efficiency and integration of the Japan ese stock market may have been greatly enhanced by the Japanese govern ment's capital markets' liberalization measures, implemented in the 19 70s and early 1980s. (JEL: F36, G11, G28). (C) 1997 Elsevier Science L td.