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Effects of Lending Relationships with Government Banks on Firm Performance: Evidence from Japan's Government Bank for Small Businesses

Author

Listed:
  • Uesugi, Iichiro
  • Uchida, Hirofumi
  • Mizusugi, Yuta

Abstract

Employing massive contract- and firm-level data provided by the SME Unit of the Japan Finance Corporation (JFC), one of the largest government lending institutions for SMEs, and linking the data with other firm-level data from a business credit information company, we empirically examine (1) the lending behavior of JFC to SMEs and (2) the effects JFC's lending had on the credit availability and the ex-post performance of its borrowers. As for (1), JFC's lending behavior, we find (1-a) a statistically significant association between JFC's lending decision and a variety of variables including those from borrowers' financial statements, and (1-b) JFC's counter-cyclical lending behavior to SMEs. As for (2), effects of JFC's lending, we find (2-a) a significant positive impact on borrowers' credit availability, capital investment, and employment, (2-b) occasional complementarities between JFC loans and loans provided by other financial institutions, and (2-c) no definitive evidence for a positive impact on the borrowers' ex-post performance including their profitability and the probabilities of their financial distress.

Suggested Citation

  • Uesugi, Iichiro & Uchida, Hirofumi & Mizusugi, Yuta, 2016. "Effects of Lending Relationships with Government Banks on Firm Performance: Evidence from Japan's Government Bank for Small Businesses," Economic Review, Hitotsubashi University, vol. 67(3), pages 238-260, July.
    • Handle: RePEc:hit:ecorev:v:67:y:2016:i:3:p:238-260
    DOI: 10.15057/28096
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    Cited by:

    1. Honda, Tomohito & Hosono, Kaoru & Miyakawa, Daisuke & Ono, Arito & Uesugi, Iichiro, 2023. "Determinants and effects of the use of COVID-19 business support programs in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 67(C).

    More about this item

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • H81 - Public Economics - - Miscellaneous Issues - - - Governmental Loans; Loan Guarantees; Credits; Grants; Bailouts

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