Relationship banking and firms’ earnings quality – Does it matter whether banks are creditors or owners?

Jochen Bigus and Marina Weicker

Journal of Banking & Finance, 2024, vol. 159, issue C

Abstract: There is mixed empirical evidence on whether close banking relationships are associated with lower or higher earnings quality of borrowing firms. This paper analyzes how this evidence can be explained by the role of the bank, whether the bank is a creditor or equity-holder of the firm. We use a sample of Japanese public firms. In Japan, (1) banks historically have both close financial and personal ties to borrowing firms, (2) banks are not only lenders, but are also permitted to have an equity stake in the firm, and (3) detailed data on bank relationship characteristics are publicly available.

Keywords: Relationship banking; Earnings quality; Bank's equity holdings (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:159:y:2024:i:c:s0378426623002364

DOI: 10.1016/j.jbankfin.2023.107050

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