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Is Bank-Centered Corporate Governance Worth It? A Cross-Sectional Analysis of the Performance of Japanese Firms during the Asset Price Deflation

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Jun-Koo Kang
Rene M. Stulz

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Abstract

This paper examines the determinants of firm stock-price performance from 1990 to 1993" in Japan. During that period of time, the typical firm on the Tokyo Stock Exchange lost more" than half its value and banks experienced severe adverse shocks. We show that firms whose debt" had a higher fraction of bank loans in 1989 performed worse from 1990 to 1993. This effect is" statistically as well as economically significant and holds when we control for a variety of" variables that affect performance during this period of time. We find that firms that were more" bank-dependent also invested less during this period than other firms. This evidence points to an" adverse effect of bank-centered corporate governance, namely that firms suffer when their banks" are experiencing difficulties.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6238.

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Date of creation: Oct 1997
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Handle: RePEc:nbr:nberwo:6238

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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. Kang, Jun-Koo & Shivdasani, Anil, 1997. "Corporate restructuring during performance declines in Japan," Journal of Financial Economics, Elsevier, vol. 46(1), pages 29-65, October. [Downloadable!] (restricted)
  2. French, Kenneth R. & Poterba, James M., 1991. "Were Japanese stock prices too high?," Journal of Financial Economics, Elsevier, vol. 29(2), pages 337-363, October. [Downloadable!] (restricted)
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  3. Kaplan, Steven N. & Minton, Bernadette A., 1994. "Appointments of outsiders to Japanese boards: Determinants and implications for managers," Journal of Financial Economics, Elsevier, vol. 36(2), pages 225-258, October. [Downloadable!] (restricted)
  4. 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)
  5. Brian J. Hall & David E. Weinstein, 1996. "The Myth of the Patient Japanese: Corporate Myopia and Financial Distress in Japan and the U.S," Harvard Institute of Economic Research Working Papers 1770, Harvard - Institute of Economic Research.
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  6. Takeo Hoshi & Anil Kashyap & David Scharfstein, 1989. "Corporate structure, liquidity, and investment: evidence from Japanese industrial groups," Finance and Economics Discussion Series 82, Board of Governors of the Federal Reserve System (U.S.).
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  7. Rajan, Raghuram G, 1992. " Insiders and Outsiders: The Choice between Informed and Arm's-Length Debt," Journal of Finance, American Finance Association, vol. 47(4), pages 1367-400, September. [Downloadable!] (restricted)
  8. David E. Weinstein & Yishay Yafeh, 1998. "On the Costs of a Bank-Centered Financial System: Evidence from the Changing Main Bank Relations in Japan," Journal of Finance, American Finance Association, vol. 53(2), pages 635-672, 04. [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. Franks, Julian R & Mayer, Colin, 2001. "Ownership and Control of German Corporations," CEPR Discussion Papers 2898, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  2. Mehdi Nekhili, 1998. "Le mode de gouvernement des entreprises japonaises: un modèle à suivre ?," Working Papers FARGO 0981202, Université de Bourgogne - Latec/Fargo (Research center in Finance,organizational ARchitecture and GOvernance). [Downloadable!]
    Other versions:
  3. Rafael La Porta & Florencio Lopez-de-Silane & Guillermo Zamarripa, 2002. "Related Lending," NBER Working Papers 8848, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  4. Carlin, Wendy & Mayer, Colin, 1999. "Finance, Investment and Growth," CEPR Discussion Papers 2233, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  5. Mechthild Schrooten, 2001. "Some Remarks on Japanese Finance, Growth and International Integration," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 70(4), pages 515-526.
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