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Banks as lenders and shareholders: Evidence from Japan

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  • Gao, Wenlian
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    Abstract

    This paper examines the effects of the main bank's equity-debt structure, (i.e., equity stakes and debt claims) on firm performance and financial policies in Japan over the period 1977-1987. Results show that firms with main bank equity stakes have lower performance than those without. However, among firms with main bank equity stakes, the equity-debt structure of claims has a positive effect on firm performance. The positive effect of the main bank's equity-debt structure is found to be greater in group-affiliated firms than in independent firms. The main bank maximizes its own interests by charging a higher interest rate when its equity stakes are relatively less than its debt claims and by prompting firms to pay more dividends when its equity stakes are relatively high.

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    Bibliographic Info

    Article provided by Elsevier in its journal Pacific-Basin Finance Journal.

    Volume (Year): 16 (2008)
    Issue (Month): 4 (September)
    Pages: 389-410

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    Handle: RePEc:eee:pacfin:v:16:y:2008:i:4:p:389-410

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    Web page: http://www.elsevier.com/locate/pacfin

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    References

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    Cited by:
    1. Nguyen, Pascal, 2011. "Corporate governance and risk-taking: Evidence from Japanese firms," Pacific-Basin Finance Journal, Elsevier, vol. 19(3), pages 278-297, June.
    2. Chong, Beng Soon, 2010. "The impact of divergence in voting and cash-flow rights on the use of bank debt," Pacific-Basin Finance Journal, Elsevier, vol. 18(2), pages 158-174, April.

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