Changing Banking Relationships and Client Firm Performance: Evidence for Japan from the 1990s
AbstractThe banking literature concludes that the performance of client firms deteriorates if their distressed main bank reduces the supply of credit. However, these results rely on the assumption that main banks have an information advantage over other banks, such that if a client firm changes its main bank, its access to credit worsens. Using Japanese data from a period including financial shocks, we show that firms change the main banking relationship when their main bank becomes distressed. In addition, the performance of client firms improves after a change in the main bank relationship. This implies that the availability of credit improves for these firms, despite the change in main bank.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 35895.
Date of creation: 12 Jan 2012
Date of revision:
Bank--firm relationships; Bank distress; Private information;
Find related papers by JEL classification:
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- G20 - Financial Economics - - Financial Institutions and Services - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-01-25 (All new papers)
- NEP-BAN-2012-01-25 (Banking)
- NEP-CFN-2012-01-25 (Corporate Finance)
- NEP-CTA-2012-01-25 (Contract Theory & Applications)
- NEP-EFF-2012-01-25 (Efficiency & Productivity)
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