Nice to be on the A-list
AbstractThis study uses Japanese data to address an important shortcoming of most of the existing literature on credit availability by including a set of unlisted firms (which are the firms most likely to be bank dependent) in the analysis, and by investigating differences between the treatment of listed and unlisted firms by their lenders. While we find evidence consistent with evergreening behavior by banks toward listed firms, whereby banks continue to lend to weak firms so they can continue making interest payments on existing loans and put off bankruptcy, the more striking result is that banks appear to be much less willing to engage in evergreening behavior toward the smaller, unlisted firms. Moreover, among listed firms, for which data on ownership by banks are available, a higher concentration of ownership of the firm by either the main bank or the firm's top three lenders increases the likelihood of the firm obtaining increased loans, suggesting that bank ownership of the firm stimulates evergreening behavior to a greater degree. However, the difference in treatment of unlisted firms relative to listed firms does not appear to be related simply to systematic differences in size between the two groups of firms. Thus, it appears that the distinguishing characteristic that determines whether a bank might evergreen loans to a firm is whether or not the firm is listed. Furthermore, this effect appears to be stronger for those firms listed on the more prestigious Tokyo Stock Exchange than for firms listed on other exchanges: being on the list (being listed) matters, and being on the A-list matters even more, consistent with a Too Connected To Fail phenomenon for nonfinancial firms in Japan.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Federal Reserve Bank of Boston in its series Working Papers with number 12-13.
Date of creation: 2012
Date of revision:
This paper has been announced in the following NEP Reports:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Ricardo J. Caballero & Takeo Hoshi & Anil K. Kashyap, 2008.
"Zombie Lending and Depressed Restructuring in Japan,"
American Economic Review,
American Economic Association, vol. 98(5), pages 1943-77, December.
- Ricardo J. Caballero & Takeo Hoshi & Anil K. Kashyap, 2006. "Zombie Lending and Depressed Restructuring in Japan," NBER Working Papers 12129, National Bureau of Economic Research, Inc.
- Alan G. Ahearne & Naoki Shinada, 2005.
"Zombie Firms and Economic Stagnation in Japan,"
Hi-Stat Discussion Paper Series
d05-95, Institute of Economic Research, Hitotsubashi University.
- Nishimura, Kiyohiko G. & Nakajima, Takanobu & Kiyota, Kozo, 2005. "Does the natural selection mechanism still work in severe recessions?: Examination of the Japanese economy in the 1990s," Journal of Economic Behavior & Organization, Elsevier, vol. 58(1), pages 53-78, September.
- Yasushi Hamao & Jianping Mei & Yexiao Xu, 2007. "Unique Symptoms of Japanese Stagnation: An Equity Market Perspective," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(4), pages 901-923, 06.
- Joe Peek & Eric S. Rosengren, 2003.
"Unnatural Selection: Perverse Incentives and the Misallocation of Credit in Japan,"
NBER Working Papers
9643, National Bureau of Economic Research, Inc.
- Joe Peek & Eric S. Rosengren, 2005. "Unnatural Selection: Perverse Incentives and the Misallocation of Credit in Japan," American Economic Review, American Economic Association, vol. 95(4), pages 1144-1166, September.
- Sekine, Toshitaka & Kobayashi, Keiichiro & Saita, Yumi, 2003. "Forbearance Lending: The Case of Japanese Firms," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 21(2), pages 69-92, August.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Catherine Spozio).
If references are entirely missing, you can add them using this form.