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Credit supply shocks and employment adjustments in Japanese listed firms

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  • Mizobata, Hirokazu

Abstract

This study investigates how idiosyncratic shocks to Japanese banks affect employment adjustments among listed firms, with a focus on differences across employment contract types. Using detailed matched bank-firm loan data from 1990 to 2013, I identify bank-specific loan supply shocks and examine their effects on employment over the business cycle. The results show that Japanese listed firms primarily adjust temporary rather than permanent workers in response to credit supply shocks. The adjustment mechanism varies with loan dependence: highly loan-dependent firms tend to reduce temporary employment when confronted with negative credit supply shocks, whereas less loan-dependent firms increase it. This pattern is especially pronounced among non-manufacturing firms and those listed on junior stock markets, where the use of temporary workers is more prevalent and external financing costs are higher. There is no statistically significant evidence that credit supply shocks operate through alternative channels, such as wage adjustments or firm delistings.

Suggested Citation

  • Mizobata, Hirokazu, 2026. "Credit supply shocks and employment adjustments in Japanese listed firms," Economic Modelling, Elsevier, vol. 162(C).
    • Handle: RePEc:eee:ecmode:v:162:y:2026:i:c:s0264999326002026
    DOI: 10.1016/j.econmod.2026.107673
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    Keywords

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    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand

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