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Long Term Loans and Investment in Japan: An Empirical Analysis Based on the Panel Data of Japanese Firms

  • Shin-ichi Fukuda

    (Faculty of Economics, University of Tokyo)

  • Ji Cong

    (Keiai University)

  • Megumi Okui

    (Institute for Posts and Telecommunications Policy)

  • Kenichi Okuda

    (Institute for Posts and Telecommunications Policy)

The purpose of this paper is to investigate whether that the policy-based allocation of long-term funds played an important role in promoting the high economic growth in post-war Japan. Using the panel data functions of Japanese firms, we estimate Tobinfs Q investment functions in two different sample periods | 1972-84 and 1985-96. In 1972-84, we find that the long-term loan ratio had an additional positive effect on investment. In particular, the result holds true regardless of the size of corporate cash flows or the type of corporate groupings. However, in 1985-96, we cannot find that a higher ratio of long-term loans increased the Japanese firmfs investment. The result indicates that the size of long-term loans had a great influence on the firmfs investment only before the financial liberalization in Japan.

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File URL: http://www.cirje.e.u-tokyo.ac.jp/research/dp/2000/2000cf80.pdf
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Paper provided by CIRJE, Faculty of Economics, University of Tokyo in its series CIRJE F-Series with number CIRJE-F-80.

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Length: 36 pages
Date of creation: Jul 2000
Date of revision:
Handle: RePEc:tky:fseres:2000cf80
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  1. Fumio Hayashi, 1997. "The Main Bank System and Corporate Investment: An Empirical Reassessment," NBER Working Papers 6172, National Bureau of Economic Research, Inc.
  2. Takeo Hoshi & Anil Kashyap & David Scharfstein, 1989. "Corporate structure, liquidity, and investment: evidence from Japanese industrial groups," Finance and Economics Discussion Series 82, Board of Governors of the Federal Reserve System (U.S.).
  3. Horiuchi Akiyoshi & Sui Qing-yuan, 1993. "Influence of the Japan Development Bank Loans on Corporate Investment Behavior," Journal of the Japanese and International Economies, Elsevier, vol. 7(4), pages 441-465, December.
  4. Fukuda, Shin-ichi & Cong, Ji & Nakamura, Akihiro, 1998. "Determinants of long-term loans: a theory and empirical evidence in Japan," Journal of Multinational Financial Management, Elsevier, vol. 8(2-3), pages 113-135, September.
  5. Shin-ichi Fukuda & Ji Cong & Akihiro Nakamura, 1998. ","Determinants of Long-term Loans: A Theory and an Empirical Evidence in Japan"," CIRJE F-Series 98-F-2, CIRJE, Faculty of Economics, University of Tokyo.
  6. Diamond, Douglas W, 1991. "Debt Maturity Structure and Liquidity Risk," The Quarterly Journal of Economics, MIT Press, vol. 106(3), pages 709-37, August.
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