1 Introduction -- 1.1 The Lost Two Decades of the Japanese Economy: Still a Puzzle -- 1.2 Zombie Firm Hypothesis and Its Limitations -- 1.3 Purpose and Outline of the Book -- References -- 2 Evolution and Recovery of Zombie Firms: Japan’s Experience -- 2.1 Background on the Controversy Over Evergreen Lending and Secular Stagnation -- 2.2 Identification of Zombie Firms -- 2.3 Evolution and Recovery of Zombie Firms by Three Categories of Financial Support -- 2.4 Empirical Framework to Analyze How Zombie Firms Recovered -- 2.5 Descriptive Statistics -- 2.6 Estimation Results for the Entire Sample Period -- 2.7 Estimation for the Sub-periods -- 2.8 Estimation of the Sub-periods by Industry -- 2.9 Concluding Remarks -- References -- 3 Sluggish Reallocation of Productive Resources after the Recovery of Zombie Firms -- 3.1 Framework of the Decomposition Analyses of Changes in Aggregated ROA -- 3.2 Result of the Decomposition Analyses of Changes in Aggregated ROA -- 3.3 Weak Demand of Productive Resources from Healthy Firms -- 3.4 Concluding Remarks -- References -- 4 Investment Behavior of Reputable Firms after the Recovery of Zombie Firms: “Conservatism” and the “Pseudo Financial Constraint Effect” -- 4.1 Introduction -- 4.2 Literature Review -- 4.3 Methodology -- 4.4 Explanatory Variables -- 4.5 Descriptive Statistics -- 4.6 Estimation Results and Interpretation -- 4.7 Concluding Remarks -- References -- 5 Final Remarks -- 5.1 Main Findings of the Book: Unified View for the Lost Two Decades of Japan -- 5.2 Policy Implications and Remaining Issues -- References.
Why has Japan’s lost decade become the lost two decades? This book attempts to provide a novel perspective on causes of stagnant productivity growth of the Japanese corporate sector during the lost two decades. Exploiting the corporate financial dataset compiled by the Development Bank of Japan, it shows empirical evidence that an excessive conservative financial policy of firms in good standing were responsible for sluggish reallocation of productive resources after the recovery of “zombie” firms. The questions taken up in the book include: How can “zombie” firms be properly identified only on the basis of financial data? Why did a majority of “zombie” firms eventually recover? Why did the productivity and profitability of the corporate sector as a whole remain low even after the recovery of “zombie” firms? Why did firms in good standing stick to an excessive conservative financial policy and seem reluctant to invest for innovation? What can be the effective prescription to revitalize these firms in good standing? Supported by both in-depth data analyses and rich anecdotal evidence, this book is highly recommended to readers who seek a convincing and comprehensive explanation of Japan’s lost two decades from the financial and corporate behavioral points of view..