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How Strongly Do "Financing Constraints" Affect Firm Behavior?: Japanese Corporate Investment since the Mid-1980s


  • Yoshiro Miwa

    (Osaka Gakuin University, The University of Tokyo)


Research on Japanese corporate finance typically starts from the premise that banks decisively affect corporate behavior. Crucial to this premise in the Japanese context are two laims: that the strength of a firm’s relationship with a specific bank (and the funds that the bank makes available to it) determines its financing constraints, and that those constraints decisively condition the way it behaves. Using firm-level data from the Corporate Enterprise Annual Statistics, I ask whether financing constraints significantly affected corporate investment in land and other fixed assets. I take firms in the real-estate-related industries and for comparison the manufacturing industry, and examine their investments during 1983-2009. The data suggest two conclusions. First, financial constraints did not significantly affect medium- and long-term investment in equipment. Second, most firms have not faced serious financial constraints during the decades since 1983. Many scholars argue that such constraints contributed both to the "Bubble" during the second half of 1980s and the following recession since the 1990s, the "Lost Two Decades". The data, however, show no evidence that financing constraints prevented firms from investing in real estate or other tangible fixed assets. These conclusions are consistent with those in other papers by Miwa, including Miwa [2011a]. They raise serious questions about the premises relating to Japanese financial markets that many scholars bring to their study of the Japanese economy. Investigating empirically the effectiveness of "financing constraints", they also have important implications for current research into macro-economic fluctuations.

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  • Yoshiro Miwa, 2012. "How Strongly Do "Financing Constraints" Affect Firm Behavior?: Japanese Corporate Investment since the Mid-1980s," CARF F-Series CARF-F-291, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
  • Handle: RePEc:cfi:fseres:cf291

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    1. Yoshiro Miwa, 2011. """Bad Loans", "Delayed Disposals", "Follow-on and Zombie Lending", and the Lost Two Decades": Lessons from the Japanese Experience?" (in Japanese)," CIRJE J-Series CIRJE-J-235, CIRJE, Faculty of Economics, University of Tokyo.
    2. Miwa, Yoshiro & Ramseyer, J. Mark, 2006. "The Fable of the Keiretsu," University of Chicago Press Economics Books, University of Chicago Press, edition 0, number 9780226532707, April.
    3. Yoshiro Miwa, 2012. "Are Japanese Firms Becoming More Independent from Their Banks?: Evidence from the Firm-Level Data of the "Corporate Enterprise Quarterly Statistics," 1994-2009," Public Policy Review, Policy Research Institute, Ministry of Finance Japan, vol. 8(4), pages 415-452, August.
    4. Olivier Blanchard, 2009. "The State of Macro," Annual Review of Economics, Annual Reviews, vol. 1(1), pages 209-228, May.
    5. Yoshiro Miwa & J. Mark Ramseyer, 2008. "The Implications of Trade Credit for Bank Monitoring: Suggestive Evidence from Japan," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 17(2), pages 317-343, June.
    6. Miwa, Yoshiro & Ramseyer, J Mark, 2002. "Banks and Economic Growth: Implications from Japanese History," Journal of Law and Economics, University of Chicago Press, vol. 45(1), pages 127-164, April.
    7. Yoshiro Miwa & J. Mark Ramseyer, 2004. "Directed Credit? The Loan Market in High-Growth Japan," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 13(1), pages 171-205, March.
    8. Miwa Yoshiro, 2011. "Bubble" or "Boom"?: Investigation of the Japanese economy in the second-half of 1980s with the firm-level data from the "Corporate Enterprise Annual Statistics", as preparatio," CARF J-Series CARF-J-078, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
    9. Steven N. Kaplan & Luigi Zingales, 1997. "Do Investment-Cash Flow Sensitivities Provide Useful Measures of Financing Constraints?," The Quarterly Journal of Economics, Oxford University Press, vol. 112(1), pages 169-215.
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