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The Real Effects of Bank-Driven Termination of Relationships: Evidence from Loan-level Matched Data

Author

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  • Nakashima, Kiyotaka
  • Takahashi, Koji

Abstract

We examine the effects of bank-driven terminations of bank-borrower relationships on the investments of borrowing firms by exploiting a matched dataset of Japanese banks and listed firms from 1991 to 2010. We find that while bank-driven terminations do not always affect investment, they do when the firms facing termination have difficulty in either establishing a new relationship or increasing borrowings within their existing relationship. Our findings coincide with the prediction of existing theoretical models whereby financial frictions in a matching process in credit markets play an important role in firm investment.

Suggested Citation

  • Nakashima, Kiyotaka & Takahashi, Koji, 2016. "The Real Effects of Bank-Driven Termination of Relationships: Evidence from Loan-level Matched Data," MPRA Paper 70668, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:70668
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    File URL: https://mpra.ub.uni-muenchen.de/70668/1/MPRA_paper_70668.pdf
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    Cited by:

    1. repec:eee:pacfin:v:46:y:2017:i:pa:p:94-108 is not listed on IDEAS
    2. Nakashima, Kiyotaka & Takahashi, Koji, 2016. "Termination of Bank-Firm Relationships," MPRA Paper 70670, University Library of Munich, Germany.

    More about this item

    Keywords

    matched lender-borrower data; relationship termination; switching of relationships; establishment of new relationships.;

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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