"A Study of Financing Behavior of Japanese Firms with Firm-Level Data from Corporate Enterprise Quarterly Statistics ? 1994~2009: Introduction and Summary" (Revised in March 2011)

From early spring to late summer in 2010 I investigated the financing behavior of Japanese firms with over \20 million in paid-in capital, using firm-level financial data from Hojin Kigyo Tokei Kiho (Corporate Enterprise Quarterly Statistics) of the Ministry of Finance. "A Study of Financing Behavior of Japanese Firms with Firm-Level Data from Corporate Enterprise Quarterly Statistics ? 1994~2009", divided into five discussion papers, constitutes the report. This Introduction and Summary forms the first of the five papers. The other four papers are: [I]. The Low "Bank-Dependence Ratio" and the Further Increase in the "Independence of Firms from Banks", CARF-J-064. [II]. The Reality of Short-term Shocks like the "Credit Crunch" of 1997-1999 and the "Financial Crisis" of 2007, and the Effectiveness of "Emergency" Economic Measures ? A Follow-up to Miwa [2008], CARF-J-065. [III]. The Reality of Trade Credit and its Link to Bank Borrowing and Inventory: (1) Overall Discussion and Preliminary Investigation, CARF-J-066. [IV]. The Reality of Trade Credit and its Link to Bank Borrowing and Inventory: (2) Correlation Coefficients and Multiple Regressions, CARF-J-067. This Statistics collects quarterly financial data from about 20,000 randomly sampled non-financial firms in 5 size-categories, most of which are unlisted small businesses. Using firm-level data in 1994-2009, I investigate the financing behavior of the firms in Japan during "the Lost Two Decades." I explore the reality of the "Credit Crunch" of 1997-1999 and the "Financial Crisis" of 2007, the effectiveness of the policy measures adopted, and the effect of the "zero-interest-rate, quantity easing" monetary policy. The most surprising finding is that the ratio of zero-short-term-borrowing was the highest, 50% in 1998 and two-thirds in 2008, among the smallest firms. The average (short-term bank borrowing)/(total asset) ratio was also lowest among this group. This "Independence from Banks" is a fundamental challenge to the basic premise of the conventional wisdom about the Japanese financial market and corporate finance.