Why Do Japanese Firms Prefer Multiple Bank Relationship? Some Evidence from Firm-Level Data

Abstract

We explore the determinants of the number of long-term bank relations of listed Japanese firms using a unique data set covering the sample period of 1982-1999. Japanese listed firms have about seven long-term bank loan relations on average, but show a large variation around the mean. We use data on loan and equity ownership to address the impact of the Japan-specific bank-firm relations and bank control on the number of loans decision. We find that having a relation with a top-equity holding bank reduces the number of bank relations, while debt-rich and cash-poor firms have more bank relations.

Keywords: Firm-bank relations, Single versus multiple borrowing, Bank control, Discrete choice model

JEL Classification: G21, G32