Banks as Lenders and Shareholders: Evidence from Japan

39 Pages Posted: 31 Oct 2010

See all articles by Wenlian Gao

Wenlian Gao

Central University of Finance and Economics

Date Written: September 30, 2007

Abstract

This paper examines the effects of the main bank’s equity-debt structure, (i.e., equity stakes and debt claims) on firm performance and financial policies in Japan over the period 1977-1987. Results show that firms with main bank equity stakes have lower performance than those without. However, among firms with main bank equity stakes, the equity-debt structure of claims has a positive effect on firm performance. The positive effect of the main bank’s equity-debt structure is found to be greater in group-affiliated firms than in independent firms. The main bank maximizes its own interests by charging a higher interest rate when its equity stakes are relatively less than its debt claims and by prompting firms to pay more dividends when its equity stakes are relatively high.

Keywords: Firm Performance, Main Bank Equity Stakes, Main Bank Debt Claims, Bank Loan Concentration

JEL Classification: G21, G32, G35

Suggested Citation

Gao, Wenlian, Banks as Lenders and Shareholders: Evidence from Japan (September 30, 2007). Available at SSRN: https://ssrn.com/abstract=1700262 or http://dx.doi.org/10.2139/ssrn.1700262

Wenlian Gao (Contact Author)

Central University of Finance and Economics ( email )

39 South College Road
Beijing
China
62289220 (Phone)

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