Bank Ties and Firm Performance in Japan: Some Evidence since FY2002

No 09-E-03, IMES Discussion Paper Series from Institute for Monetary and Economic Studies, Bank of Japan

Abstract: Since the mid-1990s, major Japanese banks have sold off a significant portion of their holdings of corporate equity. Using information on the identity of Japanese firms' top 10 shareholders, this paper explores the process of banks' equity disposal. There is some evidence that, after FY2001, banks' sales of equity accelerated, even holdings in firms for which the bank served as the main bank. However, affiliation with a main bank - proxied by firm-bank loan and shareholding ties - continues to be negatively associated with firm performance through FY2004. Regression estimates suggest that firms with strong bank ties are less profitable, face higher interest payments, and yet do not seem to enjoy lower stock price volatility than other firms. These effects are strongest for firms with a history of outside financing options, consistent with earlier arguments that the benefits of main bank relationships accrue to the banks themselves.

Keywords: Cross-Shareholding; Main Bank; Japanese Banks; Firm Performance (search for similar items in EconPapers)
JEL-codes: G21 G32 L25 (search for similar items in EconPapers)
Date: 2009-01
New Economics Papers: this item is included in nep-ban and nep-bec
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Working Paper: Bank ties and firm performance in Japan: some evidence since FY2002 (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:ime:imedps:09-e-03

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