WINDFALL PROFITS AND VERTICAL RELATIONSHIPS - WHO GAINED IN THE JAPANESE AUTO INDUSTRY FROM VERS

This paper employs an event study to analyze the effect of the 1981 vo luntary export restraint (VER) agreements on profits in the Japanese a utomobile industry. Stock price movements of seven Japanese automakers and 69 of their suppliers are examined. The results indicate that the profits of Japan's producers of passenger cars rose as a result of th e VERs, while only some suppliers, large ones and those producing spec ialized parts or services, appear to have shared the benefits. VERs in creased profits for some firms in the Japanese auto industry, but many suppliers did not share the windfall.