Corporate Structure, Liquidity, and Investment: Evidence from Japanese Industrial Groups

Financing Constraints and Unemployment: Evidence from the Great Recession

“…Our paper also reinforces the conclusions in Gertler and Gilchrist (1994), who …nd that growth in sales, inventories, and bank debt of small manufacturing …rms is more sensitive to monetary policy shocks than that of larger …rms. Similarly, these …ndings are consistent with other studies that document the impact of credit constraints on investment spending (Fazzari, Hubbard, and Peterson 1988, Gertler and Hubbard 1988, Hoshi, Kashyap, and Scharfstein 1991, Whited 1992, Kashyap, Lamont, and Stein 1994, and Duchin, Ozbas, and Sensoy 2010 and employment (Sharpe 1994, Nickell and Nicolitsas 1999, Gozzi and Goetz 2010, Benmelech, Bergman, and Seru 2011, and Bascim, Baskaya, and Kilinc 2011. Methodologically, our paper di¤ers from the latter papers in that we di¤erentiate …rms by both size and external …nancial dependence.…”

Does Financial Structure Matter?

“…These studies have employed rigorous country-specific measures of financial structure. Studies of Germany and Japan use measures of whether banks own shares or whether a company has a "main bank" respectively (Hoshi et al, 1991;Mork and Nakkamura, 1999;Weinstein and Yafeh, 1998).…”

“…The studies that analyze the UK and the U.S. as marketbased systems versus Japan and Germany as bank-based systems (e.g. Hoshi et al, 1991;Mork and Nakkamura, 1999;Weinstein and Yafeh, 1998;Arestis et al, 2001) tend to show that financial structure matters. However, they are susceptible to the criticism that these countries historically share similar growth rates.…”

Bank Commitment Relationships, Cash Flow Constraints, and Liquidity Management

“…14 Hoshi et al (1991) found that investment by the Japanese firms that belonged to Keiretsu was less sensitive to the lagged stock of liquidity as well as the flow of cash over the period. Houston and James (1995) found a similar result in their study.…”

“…Fazzari et al (1988) use a positive correlation between investment and cashflow--given prospects--as a proxy for the degree of financial constraint on firms' investment spending. 2 Among Japanese firms, for example, Hoshi et al (1991) find that those affiliated with one of the financial-industrial conglomerates--the Keiretsu--are less cash flow constrained without a Keiretsu affiliation. Banking relationship in a Japanese Keiretsu is much closer than in the U.S., however, so it is not clear whether a U.S. banking relationship has the same effect as in Japan.…”