Single Versus Multiple Main Bank Relationships: Evidence from Japan

22 Pages Posted: 13 Sep 2003

See all articles by Takato Hiraki

Takato Hiraki

International University of Japan

Akitoshi Ito

Hitotsubashi University Business School

Fumiaki Kuroki

NLI Research Institute

Date Written: March 21, 2003

Abstract

In this study, we investigate whether multiple main bank relationships reduce the so-called "hold-up costs" of bank financing (Rajan (1992)) by examining the panel data of Japanese companies listed on the Tokyo Stock Exchange, first and second sections during the period from 1991 to 1998. Our empirical results show that main bank borrowing is negatively related to the profitability of the firm, which suggests the significant presence of holdup costs. However, multiple main bank relationships reduce the holdup costs and lead to higher profitability. This mitigating effect of multiple main bank relationships is larger for firms with higher value of growth opportunities than firms with lower value of growth opportunities.

Keywords: Holdup Costs, Multiple Bank Relationships, Main Bank, Japanese Firms

JEL Classification: G32, G34

Suggested Citation

Hiraki, Takato and Ito, Akitoshi and Kuroki, Fumiaki, Single Versus Multiple Main Bank Relationships: Evidence from Japan (March 21, 2003). Available at SSRN: https://ssrn.com/abstract=437320 or http://dx.doi.org/10.2139/ssrn.437320

Takato Hiraki

International University of Japan ( email )

Research Institute
Koksai-cho 777
Minami-uonuma-shi, Niigata-ken 949-7277
Japan
+81-25-779-1481 (Phone)
+81-25-779-1187 (Fax)

Akitoshi Ito (Contact Author)

Hitotsubashi University Business School ( email )

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

Fumiaki Kuroki

NLI Research Institute ( email )

Tokyo, 100-0006
Japan

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