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Bank Lending and Firm Activities: Overcoming Identification Problems

In: The Economics of Interfirm Networks

Author

Listed:
  • Kaoru Hosono

    (Gakushuin University)

  • Daisuke Miyakawa

    (Hitotsubashi University)

Abstract

This chapter presents an overview of the extant literature on the real impact of financial constraints, with a particular focus on financial constraints originating from adverse shocks to bank lending. While there has been significant progress in theoretical research on the causal link between negative fund supply shocks and various firm activities, there are relatively few empirical studies that successfully identify loan supply shocks. The first part of this chapter reviews the large body of literature on this topic and details how recent studies have attempted to overcome the important identification challenge of disentangling fund supply and demand shocks. Following the discussion of various attempts to overcome this challenge ranging from the use of natural experiments to the employment of extensive panel datasets, two studies by the authors of this chapter are discussed in detail, which employ a natural disaster in Japan as a natural experiment to examine the real impact of financial constraints on the capital investment and export behavior of firms.

Suggested Citation

  • Kaoru Hosono & Daisuke Miyakawa, 2015. "Bank Lending and Firm Activities: Overcoming Identification Problems," Advances in Japanese Business and Economics, in: Tsutomu Watanabe & Iichiro Uesugi & Arito Ono (ed.), The Economics of Interfirm Networks, edition 127, chapter 12, pages 237-260, Springer.
    • Handle: RePEc:spr:advchp:978-4-431-55390-8_12
    DOI: 10.1007/978-4-431-55390-8_12
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    Cited by:

    1. Arito Ono & Kosuke Aoki & Shinichi Nishioka & Kohei Shintani & Yosuke Yasui, 2016. "Long-term interest rates and bank loan supply: Evidence from firm-bank loan-level data," Bank of Japan Working Paper Series 16-E-2, Bank of Japan.
    2. João Amador & Arne J. Nagengast, 2015. "The Effect of Bank Shocks on Firm-Level and Aggregate Investment," Working Papers w201515, Banco de Portugal, Economics and Research Department.

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