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Japan's Banking Crisis: Who has the Most to Lose?

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Author Info
Miyajima, Hideaki
Yafeh, Yishay
Abstract

Japan has experienced a deep and prolonged banking crisis in the 1990s. In this paper we attempt to identify the characteristics of companies which have the most to lose from the banks' malaise. Using stock price data, we calculate abnormal returns of non-financial companies around significant dates in the history of the banking crisis, starting in 1995. The events we study include various government actions to address the crisis, downgrading of banks by international rating agencies, and bank mergers. We find that not all companies are equally sensitive to events in the banking sector. The most affected are small companies, with low profits, in low-tech sectors, with high leverage and limited access to bond markets. These findings are consistent with macroeconomic "credit crunch" theories according to which small companies with limited reputation are the most affected when banks reduce lending. Our results are also in line with theories suggesting that bank debt is not very important for financing innovation.

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File URL: http://hermes-ir.lib.hit-u.ac.jp/rs/bitstream/10086/13929/1/wp2003-15a.pdf
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Paper provided by Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University in its series CEI Working Paper Series with number 2003-15.

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Length: 30 p.
Date of creation: Jun 2003
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Handle: RePEc:hit:hitcei:2003-15

Note: This Draft: May 2003
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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.:
  1. Bae, Kee-Hong & Kang, Jun-Koo & Lim, Chan-Woo, 2002. "The value of durable bank relationships: evidence from Korean banking shocks," Journal of Financial Economics, Elsevier, vol. 64(2), pages 181-214, May. [Downloadable!] (restricted)
  2. Slovin, Myron B & Sushka, Marie E & Polonchek, John A, 1993. " The Value of Bank Durability: Borrowers as Bank Stakeholders," Journal of Finance, American Finance Association, vol. 48(1), pages 247-66, March. [Downloadable!] (restricted)
  3. Magnus Blomström & Jennifer Corbett & Fumio Hayashi & Anil Kashyap, 2003. "Structural Impediments to Growth in Japan," NBER Books, National Bureau of Economic Research, Inc, number blom03-1.
  4. Carlin, Wendy & Mayer, Colin, 1999. "Finance, Investment and Growth," CEPR Discussion Papers 2233, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  5. Elijah Brewer, III & Hesna Genay & William Curt Hunter & George G. Kaufman, 2002. "The value of banking relationships during a financial crisis: evidence from failures of Japanese banks," Proceedings, Federal Reserve Bank of San Francisco, issue Sep. [Downloadable!]
  6. Peek, Joe & Rosengren, Eric S., 2001. "Determinants of the Japan premium: actions speak louder than words," Journal of International Economics, Elsevier, vol. 53(2), pages 283-305, April. [Downloadable!] (restricted)
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  7. Yamori, Nobuyoshi & Murakami, Akinobu, 1999. "Does bank relationship have an economic value?: The effect of main bank failure on client firms," Economics Letters, Elsevier, vol. 65(1), pages 115-120, October. [Downloadable!] (restricted)
  8. Gertler, Mark & Gilchrist, Simon, 1994. "Monetary Policy, Business Cycles, and the Behavior of Small Manufacturing Firms," The Quarterly Journal of Economics, MIT Press, vol. 109(2), pages 309-40, May. [Downloadable!] (restricted)
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  9. Djankov, Simeon & Jindra, Jan & Klapper, Leora F., 2005. "Corporate valuation and the resolution of bank insolvency in East Asia," Journal of Banking & Finance, Elsevier, vol. 29(8-9), pages 2095-2118, August. [Downloadable!] (restricted)
  10. Kashyap, Anil K & Stein, Jeremy C & Wilcox, David W, 1993. "Monetary Policy and Credit Conditions: Evidence from the Composition of External Finance," American Economic Review, American Economic Association, vol. 83(1), pages 78-98, March. [Downloadable!] (restricted)
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  11. Gibson, Michael S, 1995. "Can Bank Health Affect Investment? Evidence from Japan," Journal of Business, University of Chicago Press, vol. 68(3), pages 281-308, July. [Downloadable!] (restricted)
  12. Takatoshi Ito & Kimie Harada, 2000. "Japan Premium and Stock Prices: Two Mirrors of Japanese Banking Crises," NBER Working Papers 7997, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  13. Elijah Brewer, III & Hesna Genay & William Curt Hunter & George G. Kaufman, 2002. "The value of banking relationships during a financial crisis: evidence from failures of Japanese banks," Working Paper Series WP-02-20, Federal Reserve Bank of Chicago. [Downloadable!]
  14. Elijah Brewer, III & Hesna Genay & William Curt Hunter & George G. Kaufman, 2002. "The value of banking relationships during a financial crisis: evidence from failures of Japanese banks," Pacific Basin Working Paper Series 02-09, Federal Reserve Bank of San Francisco. [Downloadable!]
  15. Michael W. Klein & Joe Peek & Eric S. Rosengren, 2002. "Troubled Banks, Impaired Foreign Direct Investment: The Role of Relative Access to Credit," American Economic Review, American Economic Association, vol. 92(3), pages 664-682, June. [Downloadable!]
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  16. Gibson, Michael S., 1997. "More Evidence on the Link between Bank Health and Investment in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 11(3), pages 296-310, September. [Downloadable!] (restricted)
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(explanations, 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.)

  1. Ahn, Sanghoon, 2003. "Technology Upgrading with Learning Cost," CEI Working Paper Series 2003-21, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University. [Downloadable!]
  2. Gennaioli, Nicola & Rossi, Stefano, 2008. "Judicial Discretion in Corporate Bankruptcy," CEI Working Paper Series 2008-5, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University. [Downloadable!]
  3. Gennaioli, Nicola & Rossi, Stefano, 2008. "Optimal Resolutions of Financial Distress by Contract," CEI Working Paper Series 2008-6, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University. [Downloadable!]
  4. Hanazaki, Masaharu & Horiuchi, Akiyoshi, 2003. "Have Banks Contributed to Efficient Management in Japan's Manufacturing?," CEI Working Paper Series 2003-22, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University. [Downloadable!]
  5. Dallago, Bruno, 2003. "Comparative Economic Systems and the New Comparative Economics: Foes, Competitors, or Complementary?," CEI Working Paper Series 2003-24, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University. [Downloadable!]
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