Corporate depreciation practice in early twentieth-century Japan: a comparative analysis of the textile industry

Yuta Sumi, Takashi Kitaura, Jumpei Yamada, Yasuhiro Shimizu and Masayoshi Noguchi

Accounting History Review, 2025, vol. 35, issue 1, 101-116

Abstract: This study examines, in a more precise manner than previously, how the financing choices of the managers of Japanese textile companies influenced their respective company’s depreciation practice under the relatively lax accounting regulations of 1910s Japan. As a general rule, depreciation expenses were placed in a subordinate position to net income in order to maintain dividend payments. In this situation, reliance on long-term funds raised through the issue of corporate bonds could have eased the pressure from the shareholders for dividends, which could have led, in turn, to a more active recognition of depreciation expenses. Through an empirical analysis using a fixed-effects model based on panel data, we provide evidence that essentially supports this argument. Thus, the choice of financing methods should be included as an additional factor that has affected the development of corporate depreciation practice in the Japanese textile industry in the early twentieth century, especially during WWI.

Date: 2025
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DOI: 10.1080/21552851.2024.2431693

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