The Great East Japan Earthquake’s Effects on Electric Power Companies’ Financial Situation

Sophie Nivoix () and Serge Rey
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Sophie Nivoix: CRIEF [Poitiers] - Centre de recherche sur l'intégration économique et financière - UP - Université de Poitiers = University of Poitiers

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Abstract: Beyond its dramatic human and social consequences, the Fukushima disaster revealed the vulnerability of the Japanese electricity sector. This may have resulted in higher volatility in stock market prices, which has had an impact on asset management strategies. Another essential aspect to investigate is the impact on the financial situation of the firms. Indeed, if the deterioration in financial ratios is too large, the entire investment strategy in the sector can be questioned. We analyse 9 different financial ratios calculated for the 10 firms in the sector over the 2007–2016 period. Our results show that most ratios have severely been deteriorated by the shock, especially those reporting corporate returns, like ROE, ROA and net income/sales. Considering the risk level, we show that the catastrophe impacted the cash policy of the firms, with higher cash levels after 2011. Moreover, there is a long-term mean reverting process since in most cases it has happened more than 3 years after the earthquake. This means that the shock has had long run consequences for both corporate and market finance indicators, as well as for the risk-return equilibrium of the whole sector. Among the firms, it is no surprise that TEPCO suffered the most serious consequences for its financial situation.

Keywords: japan; electric power industry; risk; return; volatility; earthquake (search for similar items in EconPapers)
Date: 2018-11-24
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Published in Asian Nations and Multinationals, Palgrave MacMillan; Springer International Publishing, pp.121-138, 2018, 978-3-030-00912-0. ⟨10.1007/978-3-030-00913-7_8⟩

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Working Paper: The Great East Japan Earthquake’s effects on electric power companies financial situation (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-02515276

DOI: 10.1007/978-3-030-00913-7_8

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