Tokyo Stock Exchange market restructuring and Japanese firm performance: empirical analysis of heterogeneous corporate responses

Tokyo Stock Exchange (TSE) restructuring in April 2022 required listed firms to choose among Prime, Standard and Growth segments under differentiated listing maintenance criteria, aimed at improving capital efficiency. Using a panel of 1297 firms (FY2018–FY2024), this study applied a difference-in-differences (DiD) design comparing higher-pressure and lower-pressure groups defined by ex ante firm characteristics. Four institutional pressures were examined: overall reform pressure on all sample firms; selection pressure on vulnerable firms (ROE below 8% or PBR below 1.0); self-disciplining pressure from segment choice among former First Section firms; and monitoring pressure from compliance plan disclosure. Vulnerable firms (73.1% of the sample) showed the largest relative adjustments, with ROE 2.767 percentage points and PBR 0.356 higher relative to non-vulnerable firms and smaller dividend intensity growth (−0.214 percentage points). Prime selectors raised dividend intensity by 0.142 percentage points more than Standard selectors, a difference that loses significance when the three classifications are modeled jointly. Compliance plan disclosure was linked to marginally significant ROE gains. However, PBR gains were short-lived, suggesting investor skepticism. Overall, selection pressure was associated with the strongest changes, whereas self-disciplining and monitoring effects were muted, underscoring both the promise and limits of market-based governance reform for listed firms.