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The Main Bank System and Corporate Investment: An Empirical Reassessment

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  • Fumio Hayashi

Abstract

This paper examines whether the sensitivity of corporate investment to internal funds depends on the firm's access to a main bank, using the sample of Japanese manufacturing firms constructed by Hayashi and Inoue (1991). For either of two classifications of firms by their access to a main bank, there is no evidence that main bank ties mitigate the sensitivity of investment to the firm's liquidity. The large effect of main bank ties reported in Hoshi, Kashyap, and Scharfstein (1991) is most likely due to the relatively poor quality of their capital stock estimate.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6172.

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Date of creation: Sep 1997
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Publication status: published as Aoki, M. and G. Saxonhouse (eds.) Finance, Governance, and Competitiveness in Japan. Oxford University Press, 2000.
Handle: RePEc:nbr:nberwo:6172

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  1. Hayashi, Fumio & Inoue, Tohru, 1991. "The Relation between Firm Growth and Q with Multiple Capital Goods: Theory and Evidence from Panel Data on Japanese Firms," Econometrica, Econometric Society, Econometric Society, vol. 59(3), pages 731-53, May.
  2. Takeo Hoshi & Anil K. Kashyap, 1990. "Evidence on q and investment for Japanese firms," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 136, Board of Governors of the Federal Reserve System (U.S.).
  3. Hayashi, Fumio, 1985. "Corporate finance side of the Q theory of investment," Journal of Public Economics, Elsevier, Elsevier, vol. 27(3), pages 261-280, August.
  4. Hoshi, Takeo & Kashyap, Anil & Scharfstein, David, 1991. "Corporate Structure, Liquidity, and Investment: Evidence from Japanese Industrial Groups," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 106(1), pages 33-60, February.
  5. Stewart C. Myers & Nicholas S. Majluf, 1984. "Corporate Financing and Investment Decisions When Firms Have InformationThat Investors Do Not Have," NBER Working Papers 1396, National Bureau of Economic Research, Inc.
  6. Myers, Stewart C. & Majluf, Nicholas S., 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Journal of Financial Economics, Elsevier, Elsevier, vol. 13(2), pages 187-221, June.
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Cited by:
  1. Wallace, Rodney B., 2003. "Environments that facilitate collusive non-investment:: Theory and application to Japan's period of rapid development," Journal of the Japanese and International Economies, Elsevier, vol. 17(2), pages 213-225, June.
  2. Jason G. Cummins & Kevin A. Hassett & Stephen D. Oliner, 1999. "Investment behavior, observable expectations, and internal funds," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 1999-27, Board of Governors of the Federal Reserve System (U.S.).
  3. Kenichiro Suzuki & David Cobham, 2005. "Recent trends in the sources of finance for Japanese firms: has Japan become a 'high internal finance' country?," Discussion Paper Series, Department of Economics, Department of Economics, University of St. Andrews 200501, Department of Economics, University of St. Andrews.
  4. V. M. González-Méndez & F. González-Rodríguez, 2000. "Un análisis de los efectos de la crisis de Banesto sobre la banca y la industria," Investigaciones Economicas, Fundación SEPI, Fundación SEPI, vol. 24(3), pages 611-640, September.
  5. Jorge A. Chan-Lau, 2001. "The Impact of Corporate Governance Structureson the Agency Cost of Debt," IMF Working Papers 01/204, International Monetary Fund.
  6. Yuzo Honda & Kazuyuki Suzuki, 2006. "Is Cash Flow a Proxy for Financing Constraints in the Investment Equation? The Case of Unlisted Japanese Firms," Discussion Papers in Economics and Business 06-24, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP).
  7. 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.
  8. Andreas Behr, 2005. "Investment, Q und Liquidity, Evidence for Germany Using Firm Level Balance Sheet Data," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), Justus-Liebig University Giessen, Department of Statistics and Economics, Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 225(1), pages 2-21, January.
  9. Shin-ichi Fukuda & Ji Cong & Megumi Okui & Kenichi Okuda, 2000. "Long Term Loans and Investment in Japan: An Empirical Analysis Based on the Panel Data of Japanese Firms," CIRJE F-Series, CIRJE, Faculty of Economics, University of Tokyo CIRJE-F-80, CIRJE, Faculty of Economics, University of Tokyo.
  10. Laurent Soulat, 2006. "Les modèles Q-investment et les modèles d'Euler : relations de banque principale, asymétries informationnelles et modifications des structures financières des firmes de keiretsu financier," Cahiers de la Maison des Sciences Economiques, Université Panthéon-Sorbonne (Paris 1) bla06010, Université Panthéon-Sorbonne (Paris 1).
  11. Kaoru Hosono & Masayo Tomiyama & Tsutomu Miyagawa, 2004. "Corporate governance and research and development: Evidence from Japan," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 13(2), pages 141-164.

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