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Financial Structure and Bankruptcy Risk in Japanese Companies

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  • Sadahiko Suzuki

    (Keio Business School)

  • Richard W Wright

    (McGill University)

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    Abstract

    Financial structure and the nature of financial risk in Japanese companies differ substantially from those of U.S. firms. As a result, the application of U.S. standards is likely to produce misleading conclusions for creditors, investors and competitors. This article examines the unique institutional relationships and the nature of debt and equity claims that are central to understanding financial risk in Japan. It reports the results of empirical testing of the types of measures that more accurately reflect bankruptcy risk in large Japanese firms. The findings indicate that measures of a company's social importance and the strength of its bank relationship may be more important at financially crucial moments than accounting information. The results are of practical value to foreign creditors and analysts, as well as to researchers.© 1985 JIBS. Journal of International Business Studies (1985) 16, 97–110

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    Bibliographic Info

    Article provided by Palgrave Macmillan in its journal Journal of International Business Studies.

    Volume (Year): 16 (1985)
    Issue (Month): 1 (March)
    Pages: 97-110

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    Handle: RePEc:pal:jintbs:v:16:y:1985:i:1:p:97-110

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    Cited by:
    1. Hasumi, Ryo & Hirata, Hideaki & Ono, Arito, 2012. "Differentiated Use of Small Business Credit Scoring by Relationship Lenders and Transactional Lenders: Evidence from Firm-Bank Matched Data in Japan," Working Paper Series 23, Center for Interfirm Network, Institute of Economic Research, Hitotsubashi University.
    2. Nikolai Naidenov, 2004. "The Main Bank System in Japan and the Crisis of the 1990s," Economic Thought journal, Bulgarian Academy of Sciences - Economic Research Institute, Bulgarian Academy of Sciences - Economic Research Institute, issue 5, pages 72-90.
    3. Hoshi, Takeo & Kashyap, Anil & Scharfstein, David, 1990. "The role of banks in reducing the costs of financial distress in Japan," Journal of Financial Economics, Elsevier, Elsevier, vol. 27(1), pages 67-88, September.
    4. Gramlich, J.D.Jeffrey D. & Limpaphayom, Piman & Ghon Rhee, S., 2004. "Taxes, keiretsu affiliation, and income shifting," Journal of Accounting and Economics, Elsevier, Elsevier, vol. 37(2), pages 203-228, June.
    5. Luke Gower, 2000. "Some Structural Causes of Japan’s Banking Problems," RBA Research Discussion Papers, Reserve Bank of Australia rdp2000-03, Reserve Bank of Australia.
    6. Chan Huh & Sun Bae Kim, 1994. "Financial regulation and banking sector performance: a comparison of bad loan problems in Japan and Korea," Economic Review, Federal Reserve Bank of San Francisco, Federal Reserve Bank of San Francisco, pages 18-29.
    7. Dewenter, Kathryn L., 2003. "The risk-sharing role of Japanese keiretsu business groups: evidence from restructuring in the 1990s," Japan and the World Economy, Elsevier, Elsevier, vol. 15(3), pages 261-274, August.
    8. Ono, Arito & Uesugi, Iichiro, 2014. "SME Financing in Japan during the Global Financial Crisis: Evidence from Firm Surveys," HIT-REFINED Working Paper Series, Institute of Economic Research, Hitotsubashi University 6, Institute of Economic Research, Hitotsubashi University.
    9. Helwege, Jean & Packer, Frank, 2003. "Determinants of the choice of bankruptcy procedure in Japan," Journal of Financial Intermediation, Elsevier, Elsevier, vol. 12(1), pages 96-120, January.
    10. Owualah, Sunday I., 2002. "SMEs, borrowing constraints and banking relationships in Japan," Japan and the World Economy, Elsevier, Elsevier, vol. 14(1), pages 87-100, January.
    11. Jeffrey D. Gramlich & Piman Limpaphayom & S. Ghon Rhee, 2002. "Taxes, Keiretsu Affiliation, and Income Shifting," Tinbergen Institute Discussion Papers, Tinbergen Institute 02-114/2, Tinbergen Institute.
    12. Jeffrey D. Gramlich & Piman Limpaphayom & S. Ghon Rhee, 2002. "Taxes, Keiretsu Affiliation, and Income Shifting," Tinbergen Institute Discussion Papers, Tinbergen Institute 02-114/2, Tinbergen Institute.
    13. Fuss, Catherine & Vermeulen, Philip, 2006. "The response of firms‘ investment and financing to adverse cash flow shocks: the role of bank relationships," Working Paper Series, European Central Bank 0658, European Central Bank.
    14. Dimitras, A. I. & Zanakis, S. H. & Zopounidis, C., 1996. "A survey of business failures with an emphasis on prediction methods and industrial applications," European Journal of Operational Research, Elsevier, Elsevier, vol. 90(3), pages 487-513, May.
    15. Nobuyuki Teshima, 2012. "Management Ownership and Risk-Shifting Investment," The Japanese Accounting Review, Research Institute for Economics & Business Administration, Kobe University, Research Institute for Economics & Business Administration, Kobe University, vol. 2, pages 75-85, December.
    16. Lichtenberg, Frank R. & Pushner, George M., 1994. "Ownership structure and corporate performance in Japan," Japan and the World Economy, Elsevier, Elsevier, vol. 6(3), pages 239-261, October.
    17. Racic, Stanko, 2010. "Is Japanese management superior? Evidence from the performance of the USA targets in partial acquisitions," Journal of Multinational Financial Management, Elsevier, Elsevier, vol. 20(1), pages 14-34, February.
    18. Gul, Ferdinand A., 1999. "Growth opportunities, capital structure and dividend policies in Japan," Journal of Corporate Finance, Elsevier, Elsevier, vol. 5(2), pages 141-168, June.
    19. Sun Bae Kim, 1991. "The use of equity positions by banks: the Japanese evidence," Economic Review, Federal Reserve Bank of San Francisco, Federal Reserve Bank of San Francisco, issue Fall, pages 41-55.
    20. Shirasu, Yoko & Xu, Peng, 2007. "The choice of financing with public debt versus private debt: New evidence from Japan after critical binding regulations were removed," Japan and the World Economy, Elsevier, Elsevier, vol. 19(4), pages 393-424, December.

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