Bank dependence and corporate propensity to save

Kan Nakajima and Takafumi Sasaki

Pacific-Basin Finance Journal, 2016, vol. 36, issue C, 150-165

Abstract: Recently, Japanese firms resumed accumulation of cash to the highest cash-holding levels among developed economies. We investigate the cash-saving behavior of these firms over the period 2002–2011, focusing on the firm–bank relationship. We find that the determinants of cash-saving policy are substantially different between bank-dependent firms and firms with access to the bond markets. We document that firm size and research and development intensity significantly determine the cash balances and cash-flow sensitivities of cash for firms that have access to the bond markets; however, this is not the case for bank-dependent firms. Furthermore, the effects of these variables become larger after the 2008 financial crisis only for firms with access to the bond markets. These results suggest that bank-dependent firms do not determine their cash-saving policies based on precautionary demands for cash.

Keywords: Bank power; Cash-flow sensitivity of cash; Cash holding; R&D (search for similar items in EconPapers)
JEL-codes: G32 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:36:y:2016:i:c:p:150-165

DOI: 10.1016/j.pacfin.2015.12.012

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