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Banking relationship numbers and new business bankruptcies

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  • Yuta Ogane

    (Nagoya University)

Abstract

This paper examines the effect of the number of correspondent financial institutions for small and medium-sized enterprises (SMEs) at the first settlement of accounts on subsequent firm bankruptcy risk using survival models. We use a unique firm-level data set of 2667 unlisted SMEs incorporated in Japan between April 2003 and December 2009. Moreover, in the nature of the analysis, we focus on firms that transact with at least one financial institution and disclose information about profit at the first settlement. We find that more correspondent financial institutions for SMEs at the first settlement increase subsequent firm bankruptcy risk. Furthermore, we check the robustness of this result with the method of instrumental variables (IV methods) and obtain similar results; in other words, the risk of firm bankruptcy increases with the number of correspondent financial institutions.

Suggested Citation

  • Yuta Ogane, 2016. "Banking relationship numbers and new business bankruptcies," Small Business Economics, Springer, vol. 46(2), pages 169-185, February.
    • Handle: RePEc:kap:sbusec:v:46:y:2016:i:2:d:10.1007_s11187-015-9688-3
    DOI: 10.1007/s11187-015-9688-3
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    4. Ogane, Yuta, 2023. "The number of bank relationships and bank lending to informationally opaque SMEs," Pacific-Basin Finance Journal, Elsevier, vol. 80(C).
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    6. OGANE Yuta, 2017. "The Number of Bank Relationships and Bank Lending to New Firms: Evidence from firm-level data in Japan," Discussion papers 17112, Research Institute of Economy, Trade and Industry (RIETI).
    7. OGANE Yuta, 2017. "Effects of Main Bank Switch on Small Business Bankruptcy," Discussion papers 17019, Research Institute of Economy, Trade and Industry (RIETI).
    8. Francesco Ciampi & Valentina Cillo & Fabio Fiano, 2020. "Combining Kohonen maps and prior payment behavior for small enterprise default prediction," Small Business Economics, Springer, vol. 54(4), pages 1007-1039, April.
    9. Angelo Castaldo & Giuliana De Luca & Berardino Barile, 2021. "Does Initial Access To Bank Loans Predict Start‐Ups' Future Default Probability? Evidence From Italy," Contemporary Economic Policy, Western Economic Association International, vol. 39(1), pages 83-106, January.

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