Corporate restructuring during performance declines in Japan

Kang, Jun‐Koo; Shivdasani, Anil

doi:10.1016/s0304-405x(97)00024-x

Cited by 331 publications

(238 citation statements)

References 40 publications

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“…More specifically, a high degree of leverage might increase the risk of insolvency and consequently the cost of debt (Altman, 1984;Andrade & Kaplan, 1998;Van Horne & Wachowicz, 2005). Second, a drop in corporate profitability and/or a decline in other variables used as proxies of economic performances are generally interpreted as a sign of economic distress (John, Lang, & Netter, 1992;Kang & Shivdasani, 1997;Andrade & Kaplan, 1998;Jiang & Wang, 2009) and a possible cause of a corporate crisis.…”

Section: Literature Reviewmentioning

confidence: 99%

Cost of Debt and Corporate Profitability

Santosuosso

2014

IBR

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This paper examines the relationship between the cost of debt and corporate profitability using a sample of 3,556 Italian unlisted firms between 2007 and 2011. On the basis of the logistic regression model, we find that the cost of debt, measured by the interest expense to financial debt ratio, is negatively correlated to various proxies of firm profitability. These findings are consistent with previous research on the relevance of indirect costs of corporate distress. However, although the analysis found evidence that unprofitable firms are highly leveraged in accordance with the Pecking order theory, we also observed that the cost of debt for the firms included in the sample is inversely dependent on the amount of financial debt.

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Section: Literature Reviewmentioning

confidence: 99%

Cost of Debt and Corporate Profitability

Santosuosso

2014

IBR

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“…15 We measure the number of bank relations in two We first show the estimation results with NBANK1 as the number of bank relations.…”

Section: Determinants Of Multiple Bank Relationships Under the Main Bmentioning

confidence: 99%

Multiple Bank Relationships and the Main Bank System: Evidence from a Matched Sample of Japanese Small Firms and Main Banks

Sterken

Ogawa

Tokutsu

2009

The Economics of Imperfect Markets

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and the workshop on Banking at University of Groningen. We are grateful to Jan P.A.M. Jacobs and the participants of the seminar and workshop for helpful comments and suggestions. This research was partially supported by a Grant-in-Aid for Scientific Research (#16330038) from the Japanese AbstractBased on a matched sample of Japanese small firms and main banks, we investigate bank-firm relationships in the early 2000s. We obtain some remarkable new findings. First, small firms have multiple bank relationships even though they have their main bank relations. Second, firms tied with financially weak main banks increase their number of bank relations to diversify liquidity risk. Third, the duration of a main bank relation has a positive effect on the number of bank relations. This is interpreted as either a reputation effect or firms' counterbalance actions against the monopoly power of main banks. To go further into this issue, we examine the effects of a main bank relation on the design of loan contracts. We find that firms with fewer bank relations tend to pledge personal guarantees to their main banks and are charged a higher interest rate. Our evidence lends support for the hypothesis of monopoly exploitation by main banks. JEL Classification Number: G21, G32

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“…To survive industry shocks, firms typically use several modes of restructuring including downsizing, layoffs, diversification as well as acquisitions (Kang and Shivdasani (1997)). Given that firms use acquisitions to respond to industry level shocks (Mitchell and Mulherin (1996), Mulherin and Boone (2000), and Andrade and Stafford (2004)), it follows that domestic firms will be more likely to make acquisitions to respond to increased competition from foreign firms.…”

Section: Related Literature and Hypothesis Developmentmentioning

confidence: 99%

Acquisitions and Foreign Competition

Srinivasan

2014

SSRN Journal

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Corporate restructuring during performance declines in Japan

Cited by 331 publications

References 40 publications

Cost of Debt and Corporate Profitability

Cost of Debt and Corporate Profitability

Multiple Bank Relationships and the Main Bank System: Evidence from a Matched Sample of Japanese Small Firms and Main Banks

Acquisitions and Foreign Competition

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