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Have Banks Contributed to Efficient Management in Japan's Manufacturing?

  • Hanazaki, Masaharu
  • Horiuchi, Akiyoshi
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    This paper statistically reexamines the conventional view that the main bank relationship has been an important element of corporate governance in Japan. According to the view, in postwar Japan, the main bank relationship has contributed to efficient management of borrower firms in place of the capital market that disciplines corporate management in the Anglo-American economy. Our analysis finds that neither the main bank relationship nor other capital market factors, which the standard governance theory regards as important determinants of managerial efficiency, consistently influenced efficiency of manufacturing firms' management defined by the total factor productivity (TFP). Instead, market competition, particularly competitive pressures from abroad, is found to have consistently enhanced management efficiency. Thus, the conventional view exaggerates importance of the main bank relationship in the Japanese corporate governance framework.

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    File URL: http://hermes-ir.lib.hit-u.ac.jp/rs/bitstream/10086/13904/1/wp2003-22a.pdf
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    Paper provided by Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University in its series CEI Working Paper Series with number 2003-22.

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    Length: 26 p.
    Date of creation: Nov 2003
    Date of revision:
    Handle: RePEc:hit:hitcei:2003-22
    Note: May 2000
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    1. Steven M. Fazzari & R. Glenn Hubbard & BRUCE C. PETERSEN, 1988. "Financing Constraints and Corporate Investment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 19(1), pages 141-206.
    2. Hoshi, Takeo & Kashyap, Anil & Scharfstein, David, 1991. "Corporate Structure, Liquidity, and Investment: Evidence from Japanese Industrial Groups," The Quarterly Journal of Economics, MIT Press, vol. 106(1), pages 33-60, February.
    3. Hoshi, Takeo & Kashyap, Anil & Scharfstein, David, 1990. "The role of banks in reducing the costs of financial distress in Japan," Journal of Financial Economics, Elsevier, vol. 27(1), pages 67-88, September.
    4. Harrison, Ann E., 1994. "Productivity, imperfect competition and trade reform : Theory and evidence," Journal of International Economics, Elsevier, vol. 36(1-2), pages 53-73, February.
    5. Frank R. Lichtenberg & George. M Pushner, 1992. "Ownership Structure and Corporate Performance in Japan," NBER Working Papers 4092, National Bureau of Economic Research, Inc.
    6. Nickell, Stephen & Wadhwani, Sushil & Wall, Martin, 1992. "Productivity growth in U.K. companies, 1975-1986," European Economic Review, Elsevier, vol. 36(5), pages 1055-1085, June.
    7. Kenneth A. Kim & Piman Limpaphayom, 1998. "A Test Of The Two-Tier Corporate Governance Structure: The Case Of Japanese Keiretsu," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 21(1), pages 37-51, 03.
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