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http://ssrn.com/abstract=227481
 
 

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Bank Monitoring and Investment: Evidence from the Changing Structure of Japanese Corporate Banking Relationships


Takeo Hoshi


University of California at San Diego; National Bureau of Economic Research (NBER)

Anil K. Kashyap


University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

David S. Scharfstein


Harvard Business School - Finance Unit; National Bureau of Economic Research (NBER)

August 1989

NBER Working Paper No. w3079

Abstract:     
During this decade the structure of corporate finance in Japan has changed dramatically. Japanese firms that once used bank debt as their prime source of financing now rely more heavily on the public capital markets. This trend was facilitated by the substantial deregulation of the Japanese capital markets. In an earlier paper (Moshi, Kashyap, and Scharfstein 1988). we demonstrated that investment by firms with close bank relationships appears to be less liquidity constrained than investment by firms without close bank ties. We interpreted this finding as evidence that bank ties tend to mitigate information problems in the capital market. This paper tracks the investment behavior of firms that have recently weakened their bank ties in favor of greater reliance on the bond market. The results suggest that these firms are now more liquidity constrained. The paper concludes with a discussion of why firms would loosen their bank ties in light of these liquidity costs.

Number of Pages in PDF File: 43

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Date posted: April 27, 2000  

Suggested Citation

Hoshi, Takeo and Kashyap, Anil K. and Scharfstein, David S., Bank Monitoring and Investment: Evidence from the Changing Structure of Japanese Corporate Banking Relationships (August 1989). NBER Working Paper No. w3079. Available at SSRN: http://ssrn.com/abstract=227481

Contact Information

Takeo Hoshi (Contact Author)
University of California at San Diego ( email )
9500 Gilman Drive
La Jolla, CA 92093-0519
United States
619-534-5018 (Phone)
619-534-3939 (Fax)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Anil K. Kashyap
University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-7260 (Phone)
773 702-0458 (Fax)
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
773-702-7260 (Phone)
773-702-0458 (Fax)
David S. Scharfstein
Harvard Business School - Finance Unit ( email )
Boston, MA 02163
United States
617-496-5067 (Phone)
617-496-8443 (Fax)
HOME PAGE: http://www.people.hbs.edu/dscharfstein/
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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