Comments on the Japanese Financial System and the Internationalization of Japanese Financial Markets

Hugh Patrick

Chapter 6 in Japan: A European Perspective, 1993, pp 69-72 from Palgrave Macmillan

Abstract: Abstract A basic issue in finance and financial markets today is the extent to which large corporations rely on stock and bond issue or on loans from banks or other financial institutions. The Japanese case is of great relevance, and has indeed been attracting considerable theoretical, empirical and practical policy interest over the past few years. The costs and benefits of capital market finance versus bank finance are very much shaped by the realities of imperfect and asymmetric information, costs of generating information, and principal—agent issues as well as ordinary transaction costs. Two key elements are monitoring arrangements and the incentives to engage in monitoring, and who controls and is responsible for corporate reorganization in times of distress. In Japan, the main bank system has played an important role in the monitoring of corporate behavior and performance, and the main banks are constrained from their own shirking in times of corporate adversity by the reputation effects on their relationships with other main banks (Sheard, 1991).

Date: 1993
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-1-349-22768-6_7

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DOI: 10.1007/978-1-349-22768-6_7

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