IDEAS home Printed from https://ideas.repec.org/p/rba/rbardp/rdp2000-03.html
   My bibliography  Save this paper

Some Structural Causes of Japan’s Banking Problems

Author

Listed:
  • Luke Gower

    (Reserve Bank of Australia)

Abstract

This paper reviews corporate finance literature which explains some of the long-term causes of the Japanese banking sector’s poor performance in the early 1990s. It concentrates on the ideas that an adverse selection problem developed in the bank lending market during the 1980s, and that banks had strong incentives to seek out borrowers which were of lower quality and which had greater exposure to adverse movements in asset prices. Possible links between these hypotheses and the macroeconomic environment are also considered.

Suggested Citation

  • Luke Gower, 2000. "Some Structural Causes of Japan’s Banking Problems," RBA Research Discussion Papers rdp2000-03, Reserve Bank of Australia.
    • Handle: RePEc:rba:rbardp:rdp2000-03
    as

    Download full text from publisher

    File URL: https://www.rba.gov.au/publications/rdp/2000/pdf/rdp2000-03.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Maximilian J.B. Hall, 1998. "Financial Reform in Japan," Books, Edward Elgar Publishing, number 1552.
    2. Hodder, James E. & Tschoegl, Adrian E., 1985. "Some Aspects of Japanese Corporate Finance," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 20(2), pages 173-191, June.
    3. Masahiko Aoki, 2013. "Toward an Economic Model of the Japanese Firm," Chapters, in: Comparative Institutional Analysis, chapter 18, pages 315-341, Edward Elgar Publishing.
    4. repec:bla:jfinan:v:53:y:1998:i:2:p:635-672 is not listed on IDEAS
    5. Osano, Hiroshi & Tsutsui, Yoshiro, 1985. "Implicit Contracts in the Japanese Bank Loan Market," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 20(2), pages 211-229, June.
    6. Diamond, Douglas W, 1991. "Monitoring and Reputation: The Choice between Bank Loans and Directly Placed Debt," Journal of Political Economy, University of Chicago Press, vol. 99(4), pages 689-721, August.
    7. Takeo Hoshi & Anil Kashyap & David Scharfstein, 1993. "The Choice Between Public and Private Debt: An Analysis of Post-Deregulation Corporate Financing in Japan," NBER Working Papers 4421, National Bureau of Economic Research, Inc.
    8. Lichtenberg, Frank R. & Pushner, George M., 1994. "Ownership structure and corporate performance in Japan," Japan and the World Economy, Elsevier, vol. 6(3), pages 239-261, October.
    9. Takeo Hoshi, 1994. "Evolution of the Main Bank System in Japan," CEPR Financial Markets Paper 0046, European Science Foundation Network in Financial Markets, c/o C.E.P.R, 33 Great Sutton Street, London EC1V 0DX..
    10. Takeo Hoshi & Anil Kashyap, 2000. "The Japanese Banking Crisis: Where Did It Come From and How Will It End?," NBER Chapters, in: NBER Macroeconomics Annual 1999, Volume 14, pages 129-212, National Bureau of Economic Research, Inc.
    11. Takeo Hoshi & Anil Kashyap & David Scharfstein, 1991. "Corporate Structure, Liquidity, and Investment: Evidence from Japanese Industrial Groups," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 106(1), pages 33-60.
    12. Horiuchi, Akiyoshi & Packer, Frank & Fukuda, Shinichi, 1988. "What role has the "Main Bank" played in Japan?," Journal of the Japanese and International Economies, Elsevier, vol. 2(2), pages 159-180, June.
    13. Myers, Stewart C., 1977. "Determinants of corporate borrowing," Journal of Financial Economics, Elsevier, vol. 5(2), pages 147-175, November.
    14. Sadahiko Suzuki & Richard W Wright, 1985. "Financial Structure and Bankruptcy Risk in Japanese Companies," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 16(1), pages 97-110, March.
    15. Hodder, James E., 1991. "Is the cost of capital lower in japan?," Journal of the Japanese and International Economies, Elsevier, vol. 5(1), pages 86-100, March.
    16. Prowse, Stephen D, 1992. "The Structure of Corporate Ownership in Japan," Journal of Finance, American Finance Association, vol. 47(3), pages 1121-1140, July.
    17. Edward J. Lincoln, 1998. "Japan's Financial Problems," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 29(2), pages 347-385.
    18. Paul Krugman, 1991. "Trade with Japan: Has the Door Opened Wider?," NBER Books, National Bureau of Economic Research, Inc, number krug91-1.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Heinrich, Ralph P., 1999. "Complementarities in Corporate Governance - A Survey of the Literature with Special Emphasis on Japan," Kiel Working Papers 947, Kiel Institute for the World Economy (IfW Kiel).
    2. Cai, Jun & Cheung, Yan-Leung & Goyal, Vidhan K., 1999. "Bank monitoring and the maturity structure of Japanese corporate debt issues," Pacific-Basin Finance Journal, Elsevier, vol. 7(3-4), pages 229-249, August.
    3. Shirasu, Yoko & Xu, Peng, 2007. "The choice of financing with public debt versus private debt: New evidence from Japan after critical binding regulations were removed," Japan and the World Economy, Elsevier, vol. 19(4), pages 393-424, December.
    4. Anderson, Christopher W. & K. Makhija, Anil, 1999. "Deregulation, disintermediation, and agency costs of debt: evidence from Japan," Journal of Financial Economics, Elsevier, vol. 51(2), pages 309-339, February.
    5. Kang, Jun-Koo & Kim, Kenneth A. & Kitsabunnarat-Chatjuthamard, P. & Nishikawa, Takeshi, 2011. "The effects of bank relations on stock repurchases: Evidence from Japan," Journal of Financial Intermediation, Elsevier, vol. 20(1), pages 94-116, January.
    6. Randall Morck & Masao Nakamura & Murray Frank, 2001. "Japanese Corporate Governance and Macroeconomic Problems," Palgrave Macmillan Books, in: Masao Nakamura (ed.), The Japanese Business and Economic System, chapter 12, pages 325-363, Palgrave Macmillan.
    7. Toru Yoshikawa & Abdul A. Rasheed & Deepak K. Datta & Joseph Rosenstein, 2006. "Financial and product market integration: Responses of Japanese firms," Management International Review, Springer, vol. 46(5), pages 529-555, September.
    8. Stephen Prowse, 1996. "Alternative Models of Financial System Development," RBA Annual Conference Volume (Discontinued), in: Malcom Edey (ed.),The Future of the Financial System, Reserve Bank of Australia.
    9. Iwaki, Hiromichi & Saito, Junyu, 2022. "Does rollover risk matter to payout policies? Evidence from Japanese listed firms," Journal of Economics and Business, Elsevier, vol. 120(C).
    10. Gul, Ferdinand A., 1999. "Growth opportunities, capital structure and dividend policies in Japan," Journal of Corporate Finance, Elsevier, vol. 5(2), pages 141-168, June.
    11. 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.
    12. Shleifer, Andrei & Vishny, Robert W, 1997. "A Survey of Corporate Governance," Journal of Finance, American Finance Association, vol. 52(2), pages 737-783, June.
    13. Gramlich, J.D.Jeffrey D. & Limpaphayom, Piman & Ghon Rhee, S., 2004. "Taxes, keiretsu affiliation, and income shifting," Journal of Accounting and Economics, Elsevier, vol. 37(2), pages 203-228, June.
    14. Tomeczek, Artur F., 2022. "The evolution of Japanese keiretsu networks: A review and text network analysis of their perceptions in economics," Japan and the World Economy, Elsevier, vol. 62(C).
    15. Sun Bae Kim, 1991. "The use of equity positions by banks: the Japanese evidence," Economic Review, Federal Reserve Bank of San Francisco, issue Fall, pages 41-55.
    16. Hirota, Shinichi, 1999. "Are Corporate Financing Decisions Different in Japan? An Empirical Study on Capital Structure," Journal of the Japanese and International Economies, Elsevier, vol. 13(3), pages 201-229, September.
    17. Patrick McGuire, 2009. "Bank ties and firm performance in Japan: some evidence since FY2002," BIS Working Papers 272, Bank for International Settlements.
    18. Shin, G. Hwan & Fraser, Donald R. & Kolari, James W., 2003. "How does banking industry consolidation affect bank-firm relationships? Evidence from a large Japanese bank merger," Pacific-Basin Finance Journal, Elsevier, vol. 11(3), pages 285-304, July.
    19. Yishay Yafeh, 2003. "An International Perspective of Corporate Groups and Their Prospects," NBER Chapters, in: Structural Impediments to Growth in Japan, pages 259-284, National Bureau of Economic Research, Inc.
    20. Hosono, Kaoru, 2003. "Growth opportunities, collateral and debt structure: the case of the Japanese machine manufacturing firms," Japan and the World Economy, Elsevier, vol. 15(3), pages 275-297, August.

    More about this item

    Keywords

    Japanese finance;

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:rba:rbardp:rdp2000-03. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Paula Drew (email available below). General contact details of provider: https://edirc.repec.org/data/rbagvau.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.