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

Abstract

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.

The Implications of Trade Credit for Bank Monitoring: Suggestive Evidence from Japan

“…Unfortunately, however, the BOJ stopped collecting these data in 1974 and more recent data are not available. Parenthetically, note two points discussed extensively in Miwa and Ramseyer (2002, 2004, 2005b, 2006a, Ch. 2, 6): first, then as now the formal regulatory restrictions on finance did not bind; second, then as now the putative “keiretsu” corporate groups and close “main bank” relationships were illusory affairs.…”

Changing the Banking Model of Service for Corporate Clients

“…16, № 2'2022 wne.fa.ru банковским сервисом, основанным на доверительных отношениях между банком и компанией (relationship banking) [10,11]. При этом предложение об усилении роли банков до вмешательства в текущие дела компании (как в Японии и частично в Германии [12]) оказалось нежизнеспособным в связи с конкуренцией за клиентов со стороны банков и желанием компаний оптимизировать свои соответствующие расходы, разделяя бизнес между различными банковскими структурами [13].…”

Corporate Leverage Strategy in an Emerging Market

“…The role of the principal transaction bank in a Korean business group is similar to that in Japan (Nam, 1996). The importance of a Japanese main bank in its corporate finance is documented in numerous papers (Aoki et al, 2000;Aoki et al, 1994;Takeo et al, 1990;Miwa and Ramseyer, 2005). This framework's positive effect on borrowing is that main bank provides implicit insurance against financial or economic distress.…”