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Market liquidity and bank-dominated corporate governance: Evidence from Japan

Author

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  • Sakawa, Hideaki
  • Ubukata, Masato
  • Watanabel, Naoki

Abstract

This paper investigates the relationship between market liquidity and bank-dominated corporate governance structure of Japanese listed firms, represented as main bank relationships and cross shareholdings. We find that (i) main bank lending relationships increase market liquidity and reduce asymmetric information in the Tokyo Stock Exchange and (ii) foreign shareholdings are positively related to market liquidity and negatively correlated with asymmetric information. This suggests that the bank monitoring mechanisms would take a substitute information production role for block holder monitoring role in the market-oriented corporate governance countries like the US.

Suggested Citation

  • Sakawa, Hideaki & Ubukata, Masato & Watanabel, Naoki, 2014. "Market liquidity and bank-dominated corporate governance: Evidence from Japan," International Review of Economics & Finance, Elsevier, vol. 31(C), pages 1-11.
  • Handle: RePEc:eee:reveco:v:31:y:2014:i:c:p:1-11
    DOI: 10.1016/j.iref.2013.11.005
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    1. repec:eee:mulfin:v:42-43:y:2017:i::p:56-73 is not listed on IDEAS
    2. Chiou, Chyi-Lun & Shu, Pei-Gi, 2017. "Overvaluation and the cost of bank debt," International Review of Economics & Finance, Elsevier, vol. 48(C), pages 235-254.

    More about this item

    Keywords

    Market liquidity; Main bank; Foreign shareholdings;

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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