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Multiple Bank Relationships and the Main Bank System: Evidence from a Matched Sample of Japanese Small Firms and Main Banks

In: The Economics of Imperfect Markets

Author

Listed:
  • Kazuo Ogawa

    (Osaka University)

  • Elmer Sterken

    (University of Groningen)

  • Ichiro Tokutsu

    (Kobe University)

Abstract

Based on a matched sample of Japanese small firms and main banks we investigate the bank-firm relationships in the early 2000s. We obtain new findings. First, even small firms with a main bank relation have multiple bank relationships. Second, firms tied with a financially weak main bank increase the number of bank relations. Third, longer duration of a main bank relation increases the number of bank relations. Moreover we find that firms with fewer bank relations pledge personal guarantees to their main banks and are charged a higher interest rate. This suggests that firms take actions against the monopoly power of a main bank.

Suggested Citation

  • Kazuo Ogawa & Elmer Sterken & Ichiro Tokutsu, 2010. "Multiple Bank Relationships and the Main Bank System: Evidence from a Matched Sample of Japanese Small Firms and Main Banks," Contributions to Economics, in: Giorgio Calcagnini & Enrico Saltari (ed.), The Economics of Imperfect Markets, chapter 0, pages 73-90, Springer.
    • Handle: RePEc:spr:conchp:978-3-7908-2131-4_4
    DOI: 10.1007/978-3-7908-2131-4_4
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    2. Kasahara, Hiroyuki & Sawada, Yasuyuki & Suzuki, Michio, 2024. "The effect of bank recapitalization policy on credit allocation, investment, and productivity: Evidence from a banking crisis in Japan," Journal of Banking & Finance, Elsevier, vol. 158(C).
    3. Chernobai, Anna & Yasuda, Yukihiro, 2013. "Disclosures of material weaknesses by Japanese firms after the passage of the 2006 Financial Instruments and Exchange Law," Journal of Banking & Finance, Elsevier, vol. 37(5), pages 1524-1542.
    4. Uchino, Taisuke, 2013. "Bank dependence and financial constraints on investment: Evidence from the corporate bond market paralysis in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 29(C), pages 74-97.
    5. Peng XU, 2017. "Bank-Firm Relationship and Small Business Innovation," Discussion papers 17062, Research Institute of Economy, Trade and Industry (RIETI).

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