Regulation and the Cost of Capital in Japan: A Case Study

Posted: 7 Oct 1996

See all articles by John Ammer

John Ammer

Board of Governors of the Federal Reserve System

Michael S. Gibson

Board of Governors of the Federal Reserve System

Date Written: July 1996

Abstract

Over the last several years, a combination of loan losses and regulatory barriers to equity issuance have left Japanese banks starved for capital. In September 1995, the Mitsubishi Bank was permitted to issue a complicated convertible security in a foreign market. The results of simulations of the price path of the underlying equity imply that Mitsubishi Bank's annualized risk-adjusted cost of capital through this instrument was between 80 and 310 basis points higher than if the bank had instead been able to issue common stock at its current price.

JEL Classification: G31, G38, G13

Suggested Citation

Ammer, John Matthew and Gibson, Michael S., Regulation and the Cost of Capital in Japan: A Case Study (July 1996). Available at SSRN: https://ssrn.com/abstract=7786

John Matthew Ammer (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States
202-452-2349 (Phone)
202-452-6424 (Fax)

Michael S. Gibson

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States
1-202-452-2495 (Phone)

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