Bank Power and Cash Holdings: Evidence from Japan

Posted: 29 Feb 2008

See all articles by Lee Pinkowitz

Lee Pinkowitz

Georgetown University - Department of Finance

Rohan Williamson

Georgetown University - McDonough School of Business

Multiple version iconThere are 3 versions of this paper

Date Written: October 2001

Abstract

Using industrial firms from the United States, German, and Japan, we examine the effect of bank power on cash holdings. We show that Japanese firms hold more cash than U.S. or German firms. We also document that Japanese cash balances are affected by the monopoly power of banks. During periods with powerful banks, firms` high cash holdings are consistent with banks extracting rents. When banks weakened, Japanese cash levels became more like U.S. firms. We conclude that strong Japanese banks persuade firms to hold large cash balances. This is contrary to widely held beliefs about the Japanese governance system.

Suggested Citation

Pinkowitz, Lee Foster and Williamson, Rohan G., Bank Power and Cash Holdings: Evidence from Japan (October 2001). Review of Financial Studies, Vol. 14, Issue 4, pp. 1059-1082, 2001. Available at SSRN: https://ssrn.com/abstract=900659

Lee Foster Pinkowitz (Contact Author)

Georgetown University - Department of Finance ( email )

3700 O Street, NW
Washington, DC 20057
United States
202-687-2689 (Phone)
202-687-4031 (Fax)

Rohan G. Williamson

Georgetown University - McDonough School of Business ( email )

3700 O Street, NW
Washington, DC 20057
United States
202-687-2284 (Phone)
202-687-4031 (Fax)

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