The Time Has Come for Banks to Say Goodbye: New Evidence on Bank Roles and Duration Effects in Relationship Terminations

52 Pages Posted: 8 Jan 2016 Last revised: 1 Feb 2021

See all articles by Kiyotaka Nakashima

Kiyotaka Nakashima

Independent Economist

Koji Takahashi

Bank for International Settlements (BIS)

Date Written: March 13, 2020

Abstract

Examining a loan-level matched sample of Japanese banks and firms, we study the factors determining the termination of bank-firm relationships. We find that such terminations are mainly driven by bank factors, and that these bank-driven terminations increase when the banks' capital conditions become worse. Furthermore, a longer duration relationship decreased the probability of termination substantially when the Japanese banking system was stable, but the duration effects weakened when the system became fragile.

Keywords: matched lender-borrower data, bank-firm relationship, capital crunch, evergreening, flight to quality, duration effect, long-term contract

JEL Classification: G01, G21, G28

Suggested Citation

Nakashima, Kiyotaka and Takahashi, Koji, The Time Has Come for Banks to Say Goodbye: New Evidence on Bank Roles and Duration Effects in Relationship Terminations (March 13, 2020). Journal of Banking and Finance, 115, 105813, Available at SSRN: https://ssrn.com/abstract=2711974 or http://dx.doi.org/10.2139/ssrn.2711974

Koji Takahashi

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4002
Switzerland

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