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Corporate Structure, Liquidity, and Investment: Evidence from Japanese Industrial Groups


  • Takeo Hoshi
  • Anil Kashyap
  • David Scharfstein


This paper presents evidence suggesting that information and incentive problems in the capital market affect investment. We come to this conclusion by examining two sets of Japanese firms. The first set has close financial ties to large Japanese banks that serve as their primary source of external finance and are likely to be well informed about the firm. The second set of firms has weaker links to a main bank and presumably faces greater problems raising capital. Investment is more sensitive to liquidity for the second set of firms than for the first set. The analysis also highlights the role of financial intermediaries in the investment process.

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  • Takeo Hoshi & Anil Kashyap & David Scharfstein, 1991. "Corporate Structure, Liquidity, and Investment: Evidence from Japanese Industrial Groups," The Quarterly Journal of Economics, Oxford University Press, vol. 106(1), pages 33-60.
  • Handle: RePEc:oup:qjecon:v:106:y:1991:i:1:p:33-60.

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    References listed on IDEAS

    1. Kenneth Burdett & Dale T. Mortensen, 1977. "Labor Supply Under Uncertainty," Discussion Papers 297, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    2. Martin S. Feldstein, 1975. "The Importance of Temporary Layoffs: An Empirical Analysis," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 6(3), pages 725-745.
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