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

Author

Listed:
  • 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)

Abstract

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 Tobin fs 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 firm's investment. The result indicates that the size of long-term loans had a great influence on the firm's investment only before the financial liberalization in Japan.

Suggested Citation

  • Shin-ichi Fukuda & Ji Cong & Megumi Okui & Kenichi Okuda, 2000. "Long Term Loans and Investment in Japan: An Empirical Analysis Based on the Panel Data of Japanese Firms," CIRJE F-Series CIRJE-F-80, CIRJE, Faculty of Economics, University of Tokyo.
  • Handle: RePEc:tky:fseres:2000cf80
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    File URL: http://www.cirje.e.u-tokyo.ac.jp/research/dp/2000/2000cf80.pdf
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    References listed on IDEAS

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    1. Takeo Hoshi & Anil Kashyap & David Scharfstein, 1991. "Corporate Structure, Liquidity, and Investment: Evidence from Japanese Industrial Groups," The Quarterly Journal of Economics, Oxford University Press, vol. 106(1), pages 33-60.
    2. 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.
    3. Douglas W. Diamond, 1991. "Debt Maturity Structure and Liquidity Risk," The Quarterly Journal of Economics, Oxford University Press, vol. 106(3), pages 709-737.
    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. Fumio Hayashi, 1997. "The Main Bank System and Corporate Investment: An Empirical Reassessment," NBER Working Papers 6172, National Bureau of Economic Research, Inc.
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    Cited by:

    1. JINJI Naoto & ZHANG Xingyuan & HARUNA Shoji, 2011. "Does Tobin's q Matter for Firms' Choices of Globalization Mode?," Discussion papers 11061, Research Institute of Economy, Trade and Industry (RIETI).
    2. Mehdi Nekhili & Dhikra Chebbi Nekhili & Nicolas Vaillant, 2009. "What matters more in R&D and Capital Expenditures Financing by Japanese Firms:Multinationality or Bank Affiliation?," Working Papers CREGO 1090103, Université de Bourgogne - CREGO EA7317 Centre de recherches en gestion des organisations.

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