Forbearance Lending: The Case of Japanese Firms
After the collapse of the asset price bubble, Japanese banks are said to refinance firms, even in cases where there is little prospect of firms repaying the loans extended. This phenomenon is known as " forbearance lending." We find the evidence which is consistent with the view that forbearance lending certainly took place, and that it suppressed the profitability of inefficient nonmanufacturing firms. First, contrary to the usual expectation, we find that outstanding loans were apt to increase to a firm whose debt-asset ratio exceeded a certain level: after the bubble burst, this nonlinear relationship between loans and debt-asset ratios became evident for nonmanufacturing firms, especially those in the construction and real estate industries. Furthermore, we also find that an increase in loans to highly indebted firms in these industries lowered their profitability.
Volume (Year): 21 (2003)
Issue (Month): 2 (August)
|Contact details of provider:|| Postal: 2-1-1 Nihonbashi, Hongoku-cho, Chuo-ku, Tokyo 103|
Web page: http://www.imes.boj.or.jp/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Oda, Nobuyuki, 1999. "Estimating Fair Premium Rates for Deposit Insurance Using Option Pricing Theory: An Empirical Study of Japanese Banks," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 17(1), pages 133-170, May.
- David E. Weinstein & Yishay Yafeh, 1998. "On the Costs of a Bank-Centered Financial System: Evidence from the Changing Main Bank Relations in Japan," Journal of Finance, American Finance Association, vol. 53(2), pages 635-672, 04.
- Frank Windmeijer, 2000. "A finite sample correction for the variance of linear two-step GMM estimators," IFS Working Papers W00/19, Institute for Fiscal Studies.
- Manuel Arellano & Stephen Bond, 1991.
"Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations,"
Review of Economic Studies,
Oxford University Press, vol. 58(2), pages 277-297.
- Tom Doan, . "RATS program to replicate Arellano-Bond 1991 dynamic panel," Statistical Software Components RTZ00169, Boston College Department of Economics.
- R Blundell & Steven Bond, .
"Initial conditions and moment restrictions in dynamic panel data model,"
W14&104., Economics Group, Nuffield College, University of Oxford.
- Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
- Richard Blundell & Steve Bond, 1995. "Initial conditions and moment restrictions in dynamic panel data models," IFS Working Papers W95/17, Institute for Fiscal Studies.
- Blundell, R. & Bond, S., 1995. "Initial Conditions and Moment Restrictions in Dynamic Panel Data Models," Economics Papers 104, Economics Group, Nuffield College, University of Oxford.
- Toshitaka Sekine, 1999. "Firm Investment and Balance-Sheet Problems in Japan," IMF Working Papers 99/111, International Monetary Fund.
- Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 277-297.
- Berglof, Erik & Roland, Gerard, 1997. "Soft budget constraints and credit crunches in financial transition," European Economic Review, Elsevier, vol. 41(3-5), pages 807-817, April.
When requesting a correction, please mention this item's handle: RePEc:ime:imemes:v:21:y:2003:i:2:p:69-92. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Kinken)
If references are entirely missing, you can add them using this form.