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Factors inhibiting Japanese firms from zero leverage: financial constraints and bank relationships

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  • Shigeo Takami

Abstract

The objective of our paper is to clarify the factors that inhibit Japanese firms from being unlevered, focusing on the interactions between financial constraints and bank relationships. Through analysis of variance, logistic regressions, and sensitivity analyses, we conclude that financial constraints and bank shareholdings, which inhibit firms from being unlevered, are more powerful than the presence of foreign investors that encourage unleverage. Based on our panel data on 822 Japanese public firms, we find that among developed countries, Japan has the fewest unlevered firms, with less than 5%. Additionally, we observe reciprocal cross stock holdings between unlevered firms and their banks.

Suggested Citation

  • Shigeo Takami, 2016. "Factors inhibiting Japanese firms from zero leverage: financial constraints and bank relationships," Asia-Pacific Journal of Accounting & Economics, Taylor & Francis Journals, vol. 23(2), pages 161-176, June.
    • Handle: RePEc:taf:raaexx:v:23:y:2016:i:2:p:161-176
    DOI: 10.1080/16081625.2015.1012089
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    Cited by:

    1. Saona, Paolo & Vallelado, Eleuterio & San Martín, Pablo, 2020. "Debt, or not debt, that is the question: A Shakespearean question to a corporate decision," Journal of Business Research, Elsevier, vol. 115(C), pages 378-392.
    2. Uz Zaman, Qamar & Ehsan, Sadaf & Hassan, Mohammad Kabir & Javed, Muzhar & Ul Hassan, Syed Iftikhar, 2022. "Corporate Social Responsibility and Zero Leverage," Jurnal Ekonomi Malaysia, Faculty of Economics and Business, Universiti Kebangsaan Malaysia, vol. 56(1), pages 33-46.
    3. Elena Alexandra Nenu & Georgeta Vintilă & Ştefan Cristian Gherghina, 2018. "The Impact of Capital Structure on Risk and Firm Performance: Empirical Evidence for the Bucharest Stock Exchange Listed Companies," IJFS, MDPI, vol. 6(2), pages 1-29, April.
    4. Morais, Flávio & Serrasqueiro, Zélia & Ramalho, Joaquim J.S., 2020. "The zero-leverage phenomenon: A bivariate probit with partial observability approach," Research in International Business and Finance, Elsevier, vol. 53(C).

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