More evidence on the link between bank health and investment in Japan

Michael S. Gibson
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Michael S. Gibson: https://www.federalreserve.gov/econres/michael-s-gibson.htm

No 549, International Finance Discussion Papers from Board of Governors of the Federal Reserve System (U.S.)

Abstract: Among stock-market-listed Japanese firms in 1994-95, the financial health of the firm's main bank did not significantly affect its investment behavior, after controlling for stock market valuation and cash flow. However, among the subset of bank-dependent firms, investment was lower by over 50 percent at firms that have one of the lowest-rated banks as their main bank. Because low-rated banks are smaller and deal with fewer firms, and because bank-dependent firms themselves tend to be smaller than non-bank-dependent firms, the aggregate effect on business investment in 1994-95 that I identify is tiny. These results contrast with Gibson (1995), a similar study which, using data for 1991-92, found a small effect of poor bank health on investment for all stock-market-listed Japanese firms and no difference between bank-dependent and non-bank-dependent firms.

Keywords: Japan; Bank investments (search for similar items in EconPapers)
Date: 1996
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Citations: View citations in EconPapers (2)

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