More evidence on the link between bank health and investment in Japan
Among stock-market-listed Japanese firms in 1994-95, the financial health of the firm's main bank did not significantly affect its investment behavior, after controlling for stock market valuation and cash flow. However, among the subset of bank-dependent firms, investment was lower by over 50 percent at firms that have one of the lowest-rated banks as their main bank. Because low-rated banks are smaller and deal with fewer firms, and because bank-dependent firms themselves tend to be smaller than non-bank-dependent firms, the aggregate effect on business investment in 1994-95 that I identify is tiny. These results contrast with Gibson (1995), a similar study which, using data for 1991-92, found a small effect of poor bank health on investment for all stock-market-listed Japanese firms and no difference between bank-dependent and non-bank-dependent firms.
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- Takeo Hoshi & Anil Kashyap & David Scharfstein, 1991.
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NBER Working Papers
4092, National Bureau of Economic Research, Inc.
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- Fumio Hayashi & Tohru Inoue, 1990.
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NBER Working Papers
3326, National Bureau of Economic Research, Inc.
- Hayashi, Fumio & Inoue, Tohru, 1991. "The Relation between Firm Growth and Q with Multiple Capital Goods: Theory and Evidence from Panel Data on Japanese Firms," Econometrica, Econometric Society, vol. 59(3), pages 731-53, May.
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