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Banking crisis and productivity of borrowing firms: Evidence from Japan

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  • Akiyoshi, Fumio
  • Kobayashi, Keiichiro

Abstract

We investigate the effects of bank distress on the productivity of borrowing firms by using data on listed companies in the Japanese manufacturing industry during the 1990s. We find that deterioration in the financial health of banks, which is measured by a decline in the capital-asset ratio, decreased the productivity of their borrowers during the period of the severe financial crisis (FY1997-1998). Our finding empirically confirms the theoretical view that an increase in financial friction negatively affects the productivity of the corporate sector.

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Bibliographic Info

Article provided by Elsevier in its journal Japan and the World Economy.

Volume (Year): 22 (2010)
Issue (Month): 3 (August)
Pages: 141-150

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Handle: RePEc:eee:japwor:v:22:y:2010:i:3:p:141-150

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Web page: http://www.elsevier.com/locate/inca/505557

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Keywords: Total factor productivity Banking crisis Credit crunch;

References

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  1. Ogawa, Kazuo, 2007. "Debt, R&D investment and technological progress: A panel study of Japanese manufacturing firms' behavior during the 1990s," Journal of the Japanese and International Economies, Elsevier, vol. 21(4), pages 403-423, December.
  2. Mark Doms & Eric J. Bartelsman, 2000. "Understanding Productivity: Lessons from Longitudinal Microdata," Journal of Economic Literature, American Economic Association, vol. 38(3), pages 569-594, September.
  3. Yamori, Nobuyoshi & Murakami, Akinobu, 1999. "Does bank relationship have an economic value?: The effect of main bank failure on client firms," Economics Letters, Elsevier, vol. 65(1), pages 115-120, October.
  4. Kobayashi, Keiichiro & Nakajima, Tomoyuki & Inaba, Masaru, 2012. "Collateral Constraint And News-Driven Cycles," Macroeconomic Dynamics, Cambridge University Press, Cambridge University Press, vol. 16(05), pages 752-776, November.
  5. Sekine, Toshitaka & Kobayashi, Keiichiro & Saita, Yumi, 2003. "Forbearance Lending: The Case of Japanese Firms," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, Institute for Monetary and Economic Studies, Bank of Japan, vol. 21(2), pages 69-92, August.
  6. Nagahata, Takashi & Sekine, Toshitaka, 2005. "Firm investment, monetary transmission and balance-sheet problems in Japan: an investigation using micro data," Japan and the World Economy, Elsevier, Elsevier, vol. 17(3), pages 345-369, August.
  7. Miyajima, Hideaki & Yafeh, Yishay, 2003. "Japan's Banking Crisis: Who has the Most to Lose?," CEI Working Paper Series, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University 2003-15, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
  8. Ricardo J. Caballero & Takeo Hoshi & Anil K. Kashyap, 2006. "Zombie Lending and Depressed Restructuring in Japan," NBER Working Papers 12129, National Bureau of Economic Research, Inc.
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  10. Shin-ichi Fukuda & Munehisa Kasuya & Jouchi Nakajima, 2005. "Bank Health and Investment: An Analysis of Unlisted Companies in Japan," CARF F-Series CARF-F-029, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
  11. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 58(2), pages 277-97, April.
  12. Kobayashi, Keiichiro & Inaba, Masaru, 2005. "Debt disorganization in Japan," Japan and the World Economy, Elsevier, Elsevier, vol. 17(2), pages 151-169, April.
  13. Kang, Jun-Koo & Stulz, Rene M, 2000. "Do Banking Shocks Affect Borrowing Firm Performance? An Analysis of the Japanese Experience," The Journal of Business, University of Chicago Press, vol. 73(1), pages 1-23, January.
  14. Fumio Hayashi & Edward C. Prescott, 2002. "Data Appendix to The 1990s in Japan: A Lost Decade," Technical Appendices hayashi02, Review of Economic Dynamics.
  15. Hideaki Miyajima & Yishay Yafeh, 2003. "Japan's Banking Crisis: Who has the Most to Lose?," Discussion papers 03010, Research Institute of Economy, Trade and Industry (RIETI).
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  23. Kawamoto, Takuji, 2005. "What Do the Purified Solow Residuals Tell Us about Japan's Lost Decade?," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, Institute for Monetary and Economic Studies, Bank of Japan, vol. 23(1), pages 113-148, February.
  24. Hayashi, Fumio & Inoue, Tohru, 1991. "The Relation between Firm Growth and Q with Multiple Capital Goods: Theory and Evidence from Panel Data on Japanese Firms," Econometrica, Econometric Society, Econometric Society, vol. 59(3), pages 731-53, May.
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Citations

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Cited by:
  1. Assaf Razin & Steven Rosefielde, 2011. "Currency and Financial Crises of the 1990s and 2000s," NBER Working Papers 16754, National Bureau of Economic Research, Inc.
  2. Kaoru Hosono & Miho Takizawa, 2012. "Do Financial Frictions Matter as a Source of Misallocation? Evidence from Japan," Discussion papers, Policy Research Institute, Ministry of Finance Japan ron246, Policy Research Institute, Ministry of Finance Japan.

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