Theses, Dissertations, and Capstone Projects

Year of Award

1992

Degree

Master of Business Administration (MBA)

College

College of Business & Professional Studies

Degree Program

Business Administration

Department

Business Administration

Keywords

securities, scandal, Asia, Tokyo, corruption

Abstract

This study investigates the corruption and the scandals that have eroded the power of the Japanese securities firms. These scandals have caused much worry in high places and the Nikkei Index of 225 stocks has tumbled close to the 21,000 level, 46 percent below its December 1989 peak. Any political or economic shock, such as civil wars anywhere in the world or a collapse in Japanese real estate prices causes the stock market to plunge anew. In the past the Ministry of Finance officials were able to summon executives from Japan's "Big Four" brokerage firms to organize a market rescue, but the scandals in the financial sector of Japanese securities have caused this rescue to be very difficult. The bureaucrats and brokers cannot work hand-in-gloves as they used to in crisis situations. Therefore, the stock market, less susceptible than before to the control of powerful insiders, crashes to unimaginable depths. In September of 1991, the Nikkei staged a modest recovery but the fact that Japan's financial elite take such a change seriously is a sign of the changes that are occurring in Japan's stock brokerages industry.

The Japanese market was once an efficient machine that sucked in trillions of yen from the nation's investors to supply cheap capital for Japan's growthdriven companies. But the Japanese market has been hit by two things: 1) The bursting of the bubble in stock and land prices, arising from a decision by the Bank of Japan to reverse its easy-money policy of the late 1980s in favor of a tough new anti-inflation stance; and, 2) The scandals that hit every major securities firm and several of their biggest banks.

The brokerages houses were caught in a number of wrongdoings: dealing with gangsters, providing over $1 billion worth of improper compensation payments to big clients who had suffered stock market losses, and using high-pressure sales tactics to drive up stocks.

The scandals may cause important changes in Japan's financial regulatory system, which has been cloaked in the obscure workings of the MoF's dealings. Causes for these practices and possible reforms to prevent them again are analyzed.

Document Type

Restricted Thesis

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