Bank Power and Cash Holdings: Evidence from Japan

50 Pages Posted: 24 Jan 1999

See all articles by Lee Pinkowitz

Lee Pinkowitz

Georgetown University - Department of Finance

Rohan Williamson

Georgetown University - McDonough School of Business

Multiple version iconThere are 3 versions of this paper

Date Written: January 11, 1999

Abstract

Using a sample of firm years from the United States, Germany and Japan, we examine the effect of bank power on the cash holdings of industrial firms. We show that firms in Japan have higher cash holdings than those in the US or Germany. We also show that the high cash levels are correlated with power of the banks. During periods of high bank power, firms' cash holdings are consistent with banks extracting rents. We conclude that the Japanese banks persuade firms to hold higher cash balances than firms in the US and Germany. This is contrary to widely held beliefs about the Japanese governance system.

JEL Classification: G31, G32, G34

Suggested Citation

Pinkowitz, Lee Foster and Williamson, Rohan G., Bank Power and Cash Holdings: Evidence from Japan (January 11, 1999). Available at SSRN: https://ssrn.com/abstract=146431 or http://dx.doi.org/10.2139/ssrn.146431

Lee Foster Pinkowitz

Georgetown University - Department of Finance ( email )

3700 O Street, NW
Washington, DC 20057
United States
202-687-2689 (Phone)
202-687-4031 (Fax)

Rohan G. Williamson (Contact Author)

Georgetown University - McDonough School of Business ( email )

3700 O Street, NW
Washington, DC 20057
United States
202-687-2284 (Phone)
202-687-4031 (Fax)

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