Do Some Lenders Have Information Advantages? Evidence from Japanese Credit Market Data

21 Pages Posted: 27 Sep 2007

See all articles by James W. Kolari

James W. Kolari

Texas A&M University - Department of Finance

G. Hwan Shin

University of Texas at Tyler

Abstract

Using detailed Japanese credit data, we test for the existence of a credit market hierarchy. Empirical tests indicate that firms with information problems are more likely to carry higher proportions of relationship loans from main banks than non-main banks, holding constant risk and control factors. We further examine credit specialization on the part of lenders by testing the relationship between client firms' information and risk characteristics and the concentration of loans obtained from depository institutions versus other financial institutions. However, no significant differences in information superiority between these two types of financial institutions are found. We conclude that our evidence supports the credit market hierarchy hypothesis for Japanese main banks in particular but not depository institutions in general.

Keywords: Bank credit, Asymmetric information, Credit hierarchy, Japanese banking

JEL Classification: G21, D82, G15

Suggested Citation

Kolari, James W. and Shin, G. Hwan, Do Some Lenders Have Information Advantages? Evidence from Japanese Credit Market Data. Journal of Banking and Finance, Vol. 28, No. , 2004. Available at SSRN: https://ssrn.com/abstract=1017097

James W. Kolari (Contact Author)

Texas A&M University - Department of Finance ( email )

MS-4218
Department of Finance
College Station, TX TX 77843-4218
United States
979-845-4803 (Phone)
979-845-3884 (Fax)

G. Hwan Shin

University of Texas at Tyler ( email )

3900 University Boulevard
Tyler, TX 75701
United States
(903) 565-5806 (Phone)

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