Does Relationship Banking Matter? Japanese Bank-Borrower Ties in Good Times and Bad

Miwa, Yoshiro; Mark, Ramseyer J.

doi:10.2139/ssrn.441981

Cited by 5 publications

(9 citation statements)

References 73 publications

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“…For Panel B, we segment the data by a firm's 1990–1994 P rofitability (operating income/total assets) and collect similar statistics. Elsewhere (Miwa & Ramseyer 2004b), we verify our conclusions with OLS—we do so by regressing 1990–1994 performance (P rofitability and G rowth , as the dependent variables) on 1986–1990 financial variables (including P rofitability and G rowth , as the independent variables). The results largely confirm the intuitive results of Table 9.…”

Section: The Resultsmentioning

confidence: 61%

“…The sizes are uneven because not all firms with accounting data also have board composition data. Banker refers to C oncurrent B anker ; data on P ast B anker changes are available in Miwa and Ramseyer (2004b). The table gives the total number of firms in each quartile, the percentage of firms with a decrease or increase in the number of C oncurrent B ankers , and the percentage of firms with no C oncurrent B ankers at the beginning of the period.…”

Section: The Resultsmentioning

confidence: 99%

“…See various discussions in, for example, Miwa and Ramseyer (forthcoming d) and Eisenberg et al (1998).…”

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confidence: 99%

“…13 13 The coefficients and t statistics for the control variables are available for the first panel in Miwa and Ramseyer (2004b). …”

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confidence: 99%

“…14 14 See Greene (1997:937). For reference, we include the Poisson equivalents in Miwa and Ramseyer (2004b:App. A‐2). …”

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confidence: 99%

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Does Relationship Banking Matter? The Myth of the Japanese Main Bank

Miwa

Ramseyer²

2005

J Empirical Legal Studies

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The Japanese “main bank system” figures prominently in the recent literature on “relationship banking,” for by most accounts the “system” epitomizes relationship finance. Traditionally (according to the literature), every large Japanese firm had a long‐term relationship with one bank that served as its “main bank.” That main bank monitored the firm, intervened in its governance through board appointments, acted as the delegated monitor for other creditors, and agreed to rescue the firm if it fell into financial distress. As Japan deregulated its financial markets in the 1980s, however, these firms abandoned their relational lender for market finance. As main banks then lost their ability to constrain the firms—as relationship banking unraveled—the firms gambled in the stock and real estate bubbles, and threw the country into recession. Using financial and governance data from 1980 through 1994, we show that none of this is true. The accounts of the Japanese main bank instead represent fables, mythical stories scholars recite because they so conveniently illustrate theories and models in vogue.

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Section: The Resultsmentioning

confidence: 61%

Section: The Resultsmentioning

confidence: 99%

“…See various discussions in, for example, Miwa and Ramseyer (forthcoming d) and Eisenberg et al (1998).…”

mentioning

confidence: 99%

“…13 13 The coefficients and t statistics for the control variables are available for the first panel in Miwa and Ramseyer (2004b). …”

mentioning

confidence: 99%

“…14 14 See Greene (1997:937). For reference, we include the Poisson equivalents in Miwa and Ramseyer (2004b:App. A‐2). …”

mentioning

confidence: 99%

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Does Relationship Banking Matter? The Myth of the Japanese Main Bank

Miwa

Ramseyer²

2005

J Empirical Legal Studies

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Who Appoints Them, What Do they Do? Evidence on Outside Directors from Japan

Miwa

Ramseyer²

2002

SSRN Journal

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Although reformers often claim Japanese firms appoint inefficiently few outside directors, the logic of market competition suggests otherwise. Given the competitive product, service, and capital markets in Japan, the firms that survive should disproportionately be firms that tend to appoint boards approaching their firm-specifically optimal structure. The resulting debate thus suggests a test: if Japanese firms do maintain suboptimal numbers of outsiders, then those with more outsiders should outperform those with fewer; if market constraints instead drive them toward their firm-specific optimum, then firm characteristics may determine board structure, but firm performance should show no observable relation to that structure. To explore the issue, we assemble data on the 1,000 largest exchange-listed Japanese firms from 1986-94. We first ask which firms tend to appoint which outsiders to their boards, and find the appointments decidedly non-random. Firms appoint directors from the banking industry when they borrow heavily, when they have fewer mortgageable assets, or when they are themselves in the service and finance industry. They appoint retired government bureaucrats when they are in construction and sell a large fraction of their output to government agencies. And they appoint other retired business executives when they have a dominant parent corporation or when they are in the construction industry and sell heavily to the private sector. Coupling OLS regressions with two-stage estimates on a subset of the data, we then ask whether the firms with more outside directors outperform those with fewer. They do not. Obviously, one cannot draw solid conclusions from the absence of significant results. Yet the regressions do suggest-exactly as the logic of market competition predicts-that board composition is endogenous: firms choose boards appropriate to them. Given that the composition does not change from the thriving 1980s to the depressed 1990s, optimal board structure also seems not (at least by the observable indices) to depend on the macroeconomic environment.

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Does Relationship Banking Matter? Japanese Bank-Borrower Ties in Good Times and Bad

Cited by 5 publications

References 73 publications

Does Relationship Banking Matter? The Myth of the Japanese Main Bank

Does Relationship Banking Matter? The Myth of the Japanese Main Bank

Haiti--Let's Talk Competition

Who Appoints Them, What Do they Do? Evidence on Outside Directors from Japan

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