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| Science Forum Index » Economy Forum » Paper: Land and Corporate Valuation in Japan |
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| Mark Monson |
 Posted: Sat Jan 07, 2006 11:06 am |
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Land and Corporate Valuation in Japan
Sami Alpanda
Department of Economics, University of Minnesota, and
Research Department, Federal Reserve Bank of Minneapolis
November 17,2003
http://e-server.e.u-tokyo.ac.jp/cirje/research/workshops/macro/macropaper03/alpanda.pdf
From the Conclusion:
"Japanese land and corporate equity values nearly doubled in the late
80's and then crashed in the 90's. This paper uses a neo-classical
growth model to address whether and if so how much of these movements
can be accounted for by the observed changes in tax and the growth rate
of the Japanese economy. The model establishes that all other things
equal, land values are higher in a debt-financed economy than a fully
equity-financed one. This is because, the tax shelter created by
debt-financing reduces the required return on the debt's collateral, in
this case land. Also, land values are very sensitive to changes in
property taxation, especially in a debt-financed economy. With the
model calibrated to Japanese data, I find that the movements in Japanese
land values can be accounted for by the observed changes in taxes and
the growth rate, but only if these changes were expected to be highly
persistent. In turn, corporate valuations are mainly driven by changes
in land prices given the large share of land in corporate tangible assets." |
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