NEC Electronics Questions
Prof. Florencio Lopez-de-Silanes
NEC Electronics
Case Questions
1. a. What characteristics of NEC Corporation make it similar to a classic Japanese Kereitsu?
b. The Japanese corporate governance system differs vastly from the US system. Discuss corporate governance issues that may arise under the Japanese Keiretsu system from the perspective of a) financiers b) owners c) suppliers and d) employees.
2. What is the fundamental value of NECE shares? Provide a valuation and a justification of how you calculated it.
3. Is NECE a good investment? How does the price of its shares compare to their fundamental value? Come up with at least two different sets of reasons why these two values may be different.
4. If you were a minority shareholder, what would you pay for the shares of a subsidiary or a company the time of the subsidiary IPO?
a. Explain the intuition behind the price that you would pay in both efficient markets (i.e., markets are fully rational) and inefficient markets (i.e., markets are less than fully efficient) and provide empirical evidence to back up each of your answers.
b. Justify your answers in question (a) using the model about “the choice between dividends and stealing” that was discussed in class.
5. Are there any incentives for parents to list subsidiaries in Japan?
a. Justify your answer conceptually.
b. Can you back up your answer with data from this case? (Hint: Think about market performance.) 6. Can you explain the incentives behind NEC’s repurchases of NEC Soft and NEC System
Technologies? Please justify your answer quantitatively.
7. a. Can you analyze the advantages and disadvantages of the 3 main choices that Ercil has? (i.e., increase its stake in NECE; sell its position; confront NEC)
b. If Ercil were to confront NEC through litigation and considering the Japanese corporate and securities laws at the time, would Ercil be able to prove self-dealing? If so, how? (i.e., what information would Ercil need to do so?)
c. If Ercil were to
NEC Electronics
Case Questions
1. a. What characteristics of NEC Corporation make it similar to a classic Japanese Kereitsu?
b. The Japanese corporate governance system differs vastly from the US system. Discuss corporate governance issues that may arise under the Japanese Keiretsu system from the perspective of a) financiers b) owners c) suppliers and d) employees.
2. What is the fundamental value of NECE shares? Provide a valuation and a justification of how you calculated it.
3. Is NECE a good investment? How does the price of its shares compare to their fundamental value? Come up with at least two different sets of reasons why these two values may be different.
4. If you were a minority shareholder, what would you pay for the shares of a subsidiary or a company the time of the subsidiary IPO?
a. Explain the intuition behind the price that you would pay in both efficient markets (i.e., markets are fully rational) and inefficient markets (i.e., markets are less than fully efficient) and provide empirical evidence to back up each of your answers.
b. Justify your answers in question (a) using the model about “the choice between dividends and stealing” that was discussed in class.
5. Are there any incentives for parents to list subsidiaries in Japan?
a. Justify your answer conceptually.
b. Can you back up your answer with data from this case? (Hint: Think about market performance.) 6. Can you explain the incentives behind NEC’s repurchases of NEC Soft and NEC System
Technologies? Please justify your answer quantitatively.
7. a. Can you analyze the advantages and disadvantages of the 3 main choices that Ercil has? (i.e., increase its stake in NECE; sell its position; confront NEC)
b. If Ercil were to confront NEC through litigation and considering the Japanese corporate and securities laws at the time, would Ercil be able to prove self-dealing? If so, how? (i.e., what information would Ercil need to do so?)
c. If Ercil were to