Title: Does Relationship Banking Matter? Japanese Bank-Borrower Ties in Good Times and Bad
Abstract: The Japanese bank system figures prominently in the recent literature on banking. By most accounts, the main bank epitomizes relationship finance: traditionally, every large Japanese firm had one, and that bank monitored the firm, participated in its governance, acted as the delegated monitor for other creditors, and rescued the firm if it fell into financial distress. Yet all this has begun to change, continue these accounts. Japan deregulated its financial markets in the 1980s, and many firms abandoned their relational lender for market finance. As the main banks then lost their ability to the constrain firms -- as relationship banking unraveled -- the firms gambled in the stock and real estate bubbles, the bubbles burst, and the firms 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, stories we collectively recite because they so conveniently illustrate the theories and models we hope to develop. Whether during the 1980s boom or the 1990s recession, they bore no resemblance to any aspect of Japanese corporate finance or governance.
Publication Year: 2003
Publication Date: 2003-08-01
Language: en
Type: preprint
Access and Citation
Cited By Count: 2
AI Researcher Chatbot
Get quick answers to your questions about the article from our AI researcher chatbot