This paper examines the development of the Tokyo Stock Exchange since its
inception in 1878 to the mid-1930s. Special attention is paid to the increases in the
number of listed stocks throughout this period. By the mid-1930s, the Tokyo Stock
Exchange had grown to a market bigger (measured relative to GDP) than many
contemporary stock exchanges in major economies. Even compared with the stock
exchanges in major countries today, the pre-war Tokyo Stock Exchange was quite large.
New listings in the spot market section of the Tokyo Stock Exchange were not restricted
for most of this period. Our regression analysis reveals that many firms decided to list
their stocks on the Tokyo Stock Exchange as they became older and bigger. The
commercial code change in 1911, which increased the protection of outside shareholders,
also had a positive impact on the listings on the Tokyo Stock Exchange. The Tokyo
Stock Exchange reform of 1918 that aimed at standardization of the spot transactions
increased the listings on the Exchange. The analysis also suggests that in the earlier
period, there was a "home bias" that the companies located in the Eastern part of Japan
(closer to the Tokyo Stock Exchange) were more likely to be listed in the Tokyo Stock
Exchange, but the effect diminished after the Exchange reform of 1918.
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