The Role of Banks in Reducing the Costs of Financial Distress in Japan

Hoshi, Takeo; Kashyap, Anil; Scharfstein, David

doi:10.3386/w3435

Cited by 175 publications

(127 citation statements)

References 8 publications

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“…We do find differences in this respect, however, between firms from Japan and from economies outside Japan. In Japan, agency issues appear less important in affecting the benefits and costs of group affiliation and much of the gains from group affiliation accrue for financially constrained firms, consistent with Hoshi et al (1990Hoshi et al ( , 1991. The differences in results between Japan and the rest of Asia are consistent with Khanna and Yafeh (2001).…”

supporting

confidence: 79%

“…The value of group affiliation to relieve financial constraints and to overcome costly financial distress is shown in case of Japan. Hoshi, Kayshap and Scharfstein (1990) find that Japanese firms in industrial groups, with close financial relationships to their banks and suppliers, invest more and sell more after the onset of distress than non-group firms do. Hoshi, Kayshap and Scharfstein (1991) analyze the role of group affiliation in Japan and find that firms with group affiliation with large Japanese banks benefit from reduced information and incentive problems as investment is less sensitive to liquidity.…”

Section: Introductionmentioning

confidence: 94%

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The Benefits and Costs of Group Affiliation: Evidence from East Asia

2002

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This paper investigates the benefits and associated agency costs of using internal capital markets through affiliating with groups using data of two thousand firms from nine East Asian economies between 1994-6. We find that mature and slow-growing firms with ownership structures more likely to create agency problems gain more from group affiliation, while young and high-growth firms more likely lose. Agency problems are important explanatory factors of firm value in economies outside Japan, but less so in Japan. Consistent with the literature, financially constrained firms benefit from group affiliation. Our results are robust to different time periods and estimation techniques.

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supporting

confidence: 79%

Section: Introductionmentioning

confidence: 94%

The Benefits and Costs of Group Affiliation: Evidence from East Asia

2002

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“…The empirical literature has not reached a robust conclusion on this issue. According to Hoshi et al (1990), in Japan firms whose debt is concentrated with a single bank, within a group of firms or keyretsu, have better access to credit in periods of distress. On the contrary, in the case of the US, Houston and James (2001) find that cash-flow sensitivity is larger at firms with an exclusive banking relationship.…”

Section: Firms' Financial Vulnerabilitymentioning

confidence: 99%

When Credit Dries Up: Job Losses in the Great Recession

Bentolila

Jansen

Jiménez

et al. 2017

Journal of the European Economic Association

202

160

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. We use a unique dataset to estimate the impact of a large credit supply shock on employment in Spain. We exploit marked differences in banks' health at the onset of the Great Recession. Several weak banks were rescued by the State and they reduced credit more than other banks. We compare employment changes from 2006 to 2010 at firms heavily indebted to weak banks before the crisis and the rest. Our estimates imply that these firms suffered an additional employment drop between 3 and 13.5 percentage points due to weak-bank attachment, representing between 8% and 36% of aggregate job losses. JEL-Code: D920, G330, J230. Terms of use: Documents in EconStor may

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“…Our hypothesis is motivated by the idea that banks can reduce the cost of lending by developing mutually beneficial relationships with firms through the accumulation of proprietary information about firms that is not easily transferable (e.g., Diamond (1984), (1991), Rajan (1994), (1995)). Although strong relationships with firms can allow banks to have longer horizons and insulate firms from short-term adverse conditions (Hoshi, Kashyap, and Scharfstein (1990)), distressed banks might not have resources to do so. Additionally, distressed banks might have incentives to act opportunistically and exploit their informational advantage over other suppliers of capital (Sharpe (1990), Rajan (1992), and Boot, Greenbaum, and Thakor (1993)).…”

mentioning

confidence: 99%

Lending Relationships and the Effect of Bank Distress: Evidence from the 2007–2009 Financial Crisis

Carvalho¹,

Ferreira²,

Matos³

2015

J. Financ. Quant. Anal.

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We study the transmission of bank distress to nonfinancial firms from 34 countries during the 2007-2009 financial crisis using systemic and bank-specific shocks. We find that bank distress is associated with equity valuation losses and investment cuts to borrower firms with the strongest lending relationships with banks. The losses are not offset by borrowers' access to public debt markets and are concentrated in firms with the greatest information asymmetry problems and weakest financial positions. Our findings suggest that public debt markets do not mitigate the effects of relationship bank distress during financial crises.

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The Role of Banks in Reducing the Costs of Financial Distress in Japan

Cited by 175 publications

References 8 publications

The Benefits and Costs of Group Affiliation: Evidence from East Asia

The Benefits and Costs of Group Affiliation: Evidence from East Asia

When Credit Dries Up: Job Losses in the Great Recession

Lending Relationships and the Effect of Bank Distress: Evidence from the 2007–2009 Financial Crisis

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