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Changing banking relationships and client-firm performance: Evidence from Japan for the 1990s

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  • Tsuruta, Daisuke

Abstract

The extant literature generally suggests that the performance of client firms deteriorates if their distressed main bank reduces the supply of credit. However, this insight is only consistent with the notion that main banks have an information advantage over other banks to the extent that a client firm has trouble getting access to credit if the firm changes its main bank. This paper shows that Japanese firms did change their main banking relationship when their main banks become distressed in a period with financial shocks. Surprisingly, these firms did not suffer from loss of access to credit and actually their performance significantly improved after their change of main banks.

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  • Tsuruta, Daisuke, 2014. "Changing banking relationships and client-firm performance: Evidence from Japan for the 1990s," Review of Financial Economics, Elsevier, vol. 23(3), pages 107-119.
    • Handle: RePEc:eee:revfin:v:23:y:2014:i:3:p:107-119
    DOI: 10.1016/j.rfe.2013.12.002
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    Cited by:

    1. Nakashima, Kiyotaka & Takahashi, Koji, 2018. "The real effects of bank-driven termination of relationships: Evidence from loan-level matched data," Journal of Financial Stability, Elsevier, vol. 39(C), pages 46-65.
    2. OGANE Yuta, 2017. "Effects of Main Bank Switch on Small Business Bankruptcy," Discussion papers 17019, Research Institute of Economy, Trade and Industry (RIETI).

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    More about this item

    Keywords

    Bank–firm relationships; Bank distress; Private information;
    All these keywords.

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • 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

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