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Banking crisis and productivity of borrowing firms: Evidence from Japan

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  • Akiyoshi, Fumio
  • Kobayashi, Keiichiro

Abstract

We investigate the effects of bank distress on the productivity of borrowing firms by using data on listed companies in the Japanese manufacturing industry during the 1990s. We find that deterioration in the financial health of banks, which is measured by a decline in the capital-asset ratio, decreased the productivity of their borrowers during the period of the severe financial crisis (FY1997-1998). Our finding empirically confirms the theoretical view that an increase in financial friction negatively affects the productivity of the corporate sector.

Suggested Citation

  • Akiyoshi, Fumio & Kobayashi, Keiichiro, 2010. "Banking crisis and productivity of borrowing firms: Evidence from Japan," Japan and the World Economy, Elsevier, vol. 22(3), pages 141-150, August.
  • Handle: RePEc:eee:japwor:v:22:y:2010:i:3:p:141-150
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    References listed on IDEAS

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    Cited by:

    1. Jaskowski, Marcin, 2015. "Should zombie lending always be prevented?," International Review of Economics & Finance, Elsevier, vol. 40(C), pages 191-203.
    2. Kaoru Hosono & Miho Takizawa, 2012. "Do Financial Frictions Matter as a Source of Misallocation? Evidence from Japan," Discussion papers ron246, Policy Research Institute, Ministry of Finance Japan.
    3. Akbar, Saeed & Rehman, Shafiq ur & Ormrod, Phillip, 2013. "The impact of recent financial shocks on the financing and investment policies of UK private firms," International Review of Financial Analysis, Elsevier, vol. 26(C), pages 59-70.
    4. Assaf Razin & Steven Rosefielde, 2011. "Currency and Financial Crises of the 1990s and 2000s," CESifo Economic Studies, CESifo, vol. 57(3), pages 499-530, September.
    5. HOSONO Kaoru & TAKIZAWA Miho, 2015. "Misallocation and Establishment Dynamics," Discussion papers 15011, Research Institute of Economy, Trade and Industry (RIETI).
    6. Mario Levis & Silvio Vismara (ed.), 2013. "Handbook of Research on IPOs," Books, Edward Elgar Publishing, number 15210.
    7. Kazuo Yamada, 2013. "How bank health affects the capital structure and performance of IPO firms: evidence from the Japanese financial crisis in the 1990s," Chapters,in: Handbook of Research on IPOs, chapter 24, pages 552-568 Edward Elgar Publishing.
    8. Dan Andrews & Filippos Petroulakis, 2017. "Breaking the Shackles: Zombie Firms, Weak Banks and Depressed Restructuring in Europe," OECD Economics Department Working Papers 1433, OECD Publishing.

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