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Bank–firm relationships and the value of cash: Evidence from the financial crisis in Japan

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  • Kaneko, Mana
  • Sasaki, Toshinori
  • Suzuki, Katsushi

Abstract

We examine the effect of bank–firm relationships on the marginal value of cash held by firms during the 2008 financial crisis using Japanese data. Our results show that (1) during the financial crisis, the close bank-firm relationships reduce the marginal value of cash. In particular, the effect is stronger for financially distressed firms. (2) Financially distressed firms with closer bank–firm relationships are less likely to save cash. These results are consistent with the information production hypothesis that close bank-firm relationships increase firms' ability to raise funds by encouraging banks to produce information, as a result, reducing the value of cash held by firms.

Suggested Citation

  • Kaneko, Mana & Sasaki, Toshinori & Suzuki, Katsushi, 2025. "Bank–firm relationships and the value of cash: Evidence from the financial crisis in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 76(C).
    • Handle: RePEc:eee:jjieco:v:76:y:2025:i:c:s0889158325000115
    DOI: 10.1016/j.jjie.2025.101362
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    More about this item

    Keywords

    Value of cash; Cash holdings; Bank–firm relationships; Financial crisis;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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