Disentangling prefectural similarities in the capital structure of Japanese SMEs through pairwise testing

Huseyin Ozturk and Yukihiro Yasuda

The European Journal of Finance, 2024, vol. 30, issue 2, 173-204

Abstract: We investigate the capital structure of small- and medium-sized enterprises in Japan during 2007–2019 to identify whether firm-specific determinants of leverage exhibit locational differences among Japanese prefectures. To do so, we propose a testing scheme that disentangles potential similarities across prefecture pairs. When we apply the proposed testing scheme by creating 1081 prefecture pairs, we find that the impact of the firm-specific determinants of leverage does not greatly differ between prefecture pairs in terms of both sign and magnitude in contrast to the significant difference found by conventional hypothesis testing. As a convenient tool for other geographical research, we also discuss that the proposed testing scheme is helpful for regional policy-making, specifically during period of external shocks, the latest of which could be regarded as the COVID-19 pandemic.

Date: 2024
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DOI: 10.1080/1351847X.2023.2201470

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