Financial Distress and Corporate Investment: The Japanese Case in the 90s

42 Pages Posted: 19 Jun 2003

See all articles by Kazuo Ogawa

Kazuo Ogawa

Osaka University - Institute of Social and Economic Research (ISER)

Date Written: June 2003

Abstract

We examine quantitatively the extent to which financial distress in the 90s affected Japanese corporate investment. Based on the firm-level data that includes small, unlisted firms, we estimate investment function to measure the impact of financial distress on investment. We find that the firm's ratio of debt to total asset exerts a significantly negative effect on investment of small firms. We also find that lending attitude of financial institutions did affect investment behavior irrespective of firm size. The impact of lending attitude on investment is notably large for 1998 labeled "credit crunch."

Keywords: Financial distress, Debt hangover, Investment, External finance premium Lending channel

JEL Classification: E22, E44, E51

Suggested Citation

Ogawa, Kazuo, Financial Distress and Corporate Investment: The Japanese Case in the 90s (June 2003). Available at SSRN: https://ssrn.com/abstract=414980 or http://dx.doi.org/10.2139/ssrn.414980

Kazuo Ogawa (Contact Author)

Osaka University - Institute of Social and Economic Research (ISER) ( email )

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