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Main bank relationship and accounting conservatism: evidence from Japan

Author

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  • Hideaki Sakawa

    (Nagoya City University)

  • Naoki Watanabel

    (Nagoya City University)

Abstract

In a market-oriented economy like the USA, the process of monitoring through lending mitigates lenders’ demand for accounting conservatism. Japanese corporate governance is characterized as a bank-dominated or relationship-oriented system. Under bank-dominated systems, main banks are expected to be effective monitors. In our model, main banks play the role of reducing the lenders’ demand for accounting conservatism by reducing information asymmetry. We find that main banks can reduce the demand for accounting conservatism. Our findings help understand accounting conservatism vis-à-vis agency problems. We provide empirical evidence to contribute to literature on banking, specifically to fields such as relationship banking.

Suggested Citation

  • Hideaki Sakawa & Naoki Watanabel, 2020. "Main bank relationship and accounting conservatism: evidence from Japan," Asian Business & Management, Palgrave Macmillan, vol. 19(1), pages 62-85, February.
    • Handle: RePEc:pal:abaman:v:19:y:2020:i:1:d:10.1057_s41291-019-00071-5
    DOI: 10.1057/s41291-019-00071-5
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    References listed on IDEAS

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    Cited by:

    1. Fang Fang & Tingbo Duan & Kun Li, 2022. "Political Connections, Ownership and Within-Firm Pay Gap," Sustainability, MDPI, vol. 14(14), pages 1-20, July.
    2. Hideaki Sakawa & Naoki Watanabel, 2020. "IPO underpricing and ownership monitoring in Japan," Asian Business & Management, Palgrave Macmillan, vol. 19(4), pages 480-503, September.
    3. Sakawa, Hideaki & Watanabel, Naoki & Gu, Junjian, 2022. "Internationalization and the reliance of analyst forecasts in stakeholder-oriented corporate governance: Evidence from Japanese MNEs," Pacific-Basin Finance Journal, Elsevier, vol. 73(C).
    4. Hideaki Sakawa & Naoki Watanabel, 2021. "Family Control and Corporate Innovation in Stakeholder-Oriented Corporate Governance," Sustainability, MDPI, vol. 13(9), pages 1-13, April.
    5. Hideaki Sakawa & Naoki Watanabel, 2022. "Accounting Frauds and Main-Bank Monitoring in Japanese Corporations," Journal of Business Ethics, Springer, vol. 180(2), pages 605-621, October.
    6. Hideaki Sakawa & Naoki Watanabel, 0. "IPO underpricing and ownership monitoring in Japan," Asian Business & Management, Palgrave Macmillan, vol. 0, pages 1-24.
    7. Naoki Watanabel & Shohei Yamauchi & Hideaki Sakawa, 2022. "The Board Structure and Performance in IPO Firms: Evidence from Stakeholder-Oriented Corporate Governance," Sustainability, MDPI, vol. 14(13), pages 1-15, July.
    8. Shige Makino & Derek Lehmberg, 2020. "The past and future contributions of research on Japanese management," Asian Business & Management, Palgrave Macmillan, vol. 19(1), pages 1-7, February.
    9. Hideaki Sakawa & Naoki Watanabel & Junjian Gu, 2021. "The Internationalization and Voluntary Adoption of International Accounting Standards by Japanese MNEs," Management International Review, Springer, vol. 61(5), pages 713-744, October.
    10. Hideaki Sakawa & Naoki Watanabel, 2020. "Institutional Ownership and Firm Performance under Stakeholder-Oriented Corporate Governance," Sustainability, MDPI, vol. 12(3), pages 1-21, January.

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