Bank size and lending relationships in Japan
AbstractCurrent theoretical and empirical research suggests that small banks have a comparative advantage in processing soft information and delivering relationship lending. The most comprehensive analysis of this view found using US data that smaller SMEs borrow from smaller banks and smaller banks have stronger relationships with their borrowers [Berger, A.N., Miller, N.H., Petersen, M.A., Rajan, R.G., Stein, J.C., 2005. Does function follow organizational form? Evidence from the lending practices of large and small banks. J. Finan. Econ. 76, 237-269]. We employ essentially the same methodology as Berger et al. on a unique Japanese data set and find results that are quite interesting from an international comparison point of view. We find, like Berger et al. in the US, that larger firms tend to borrow from larger banks, and that smaller banks have stronger relationships with their borrowers. However, additionally we find that the former result is not due to larger firms being more transparent in terms of their financial statements. These results imply that although small banks' comparative advantage in relationship lending is likely to be universal, large banks may not necessarily have a comparative advantage in extending transactions-based lending. J. Japanese Int. Economies 22 (2) (2008) 242-267.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of the Japanese and International Economies.
Volume (Year): 22 (2008)
Issue (Month): 2 (June)
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Web page: http://www.elsevier.com/locate/inca/622903
Other versions of this item:
- Hirofumi Uchida & Gregory F.Udell & Wako Watanabe, 2007. "Bank Size and Lending Relationships in Japan," NBER Working Papers 13005, National Bureau of Economic Research, Inc.
- Hirofumi Uchida & Gregory F. Udell & Wako Watanabe, 2006. "Bank Size and Lending Relationships in Japan," Discussion papers 06029, Research Institute of Economy, Trade and Industry (RIETI).
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
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