Bank Mergers, Loan Contracts, and Firm Performance: A Quasi-Experiment from Japanese Bank Mergers

25 Pages Posted: 17 Feb 2014

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: February 15, 2014

Abstract

In this paper, we investigate the impact of bank mergers on the lending relationship and on client-firm performance. We study bank mergers that have occurred in Japan since 2000 and find that banks reduce the loan amounts for firms with which they have a close relationship and that banks’ cumulative shareholding by the pre-merger banks is non-linearly related to firms’ subsequent performance. Japanese banks are prohibited from holding more than 5% of a firm’s equity. This can be used as exogenous shock to investigate the linkage between the existence of blockholder and firm’s subsequent performance. We find that the cumulative equity stake held by pre-merger banks is non-linearly related to firms’ subsequent performance, and the kink point is 5%. Using the bank merger events and the 5% rule as the exogenous shock for blockholders, our findings have significant relevance in corporate governance debates.

Keywords: corporate governance, firm performance, bank merger

JEL Classification: G21, G30

Suggested Citation

Suzuki, Katsushi and Yamada, Kazuo, Bank Mergers, Loan Contracts, and Firm Performance: A Quasi-Experiment from Japanese Bank Mergers (February 15, 2014). Asian Finance Association (AsianFA) 2014 Conference Paper. Available at SSRN: https://ssrn.com/abstract=2396681 or http://dx.doi.org/10.2139/ssrn.2396681

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

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
102
Abstract Views
884
rank
271,496
PlumX Metrics