Blockholder and Firm Performance: Quasi-Experiment Using Japanese Bank Mergers

25 Pages Posted: 24 Aug 2013

See all articles by Katsushi Suzuki

Katsushi Suzuki

Hitotsubashi University - Graduate School of International Corporate Strategy

Kazuo Yamada

Ritsumeikan University - College of Business Administration

Date Written: August 22, 2013

Abstract

Using the Japanese bank merger dataset for the 2000s, this paper investigates whether the reduction of the ownership ratio by the blockholder affects companies’ operating performance and bank-firm relationships. In Japan, banks are prohibited from holding more than 5% of the business company’s equity. When two or more banks consolidate, the post-merged bank must sell up to 5% of its shares. This rule enables us to remove the endogeneity between the block-shareholder and operating performance, which is where previous literature suffers endogeneity problems. The findings can be summarized as follows. First, to mitigate the endogeneity concern, we employ the regression discontinuity design (RDD) and find that subsequent operating performance has a non-linear relationship with the cumulative shareholding ratio in the pre-merger period. Second, we investigate the bank-firm relationship and find that the lending amount from banks suffers a decline due to the 5% rule after the banks merger.

Keywords: Corporate governance, firm performance, bank merger, regression discontinuity

JEL Classification: G21, G34

Suggested Citation

Suzuki, Katsushi and Yamada, Kazuo, Blockholder and Firm Performance: Quasi-Experiment Using Japanese Bank Mergers (August 22, 2013). 26th Australasian Finance and Banking Conference 2013, Available at SSRN: https://ssrn.com/abstract=2314683 or http://dx.doi.org/10.2139/ssrn.2314683

Katsushi Suzuki

Hitotsubashi University - Graduate School of International Corporate Strategy ( email )

2-1-2 Hitotsubashi
Chiyoda-ku,
Tokyo, 101-8439
Japan

Kazuo Yamada (Contact Author)

Ritsumeikan University - College of Business Administration ( email )

2-150 Iwakura
Ibaraki, Osaka 5678570
Japan

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