The Effect of Bank Failure on Client Firms -A Study on the Hanwa Bank's Failure- (in Japanese)

Yoshiko Murakami

Economic Analysis, 2006, vol. 178, 3-20

Abstract: This paper examines the effect of Hanwa Bank's failure on unlisted client firms. I find that, in the short term after this failure, a decline in the profitability was significantly larger at firms who had Hanwa Bank as their main-bank. This result suggests that losing relationship with the main bank may increase cost of capital for unlisted firms at least temporarily through the loss of the information which had been gathered and accumulated within the main bank.

Date: 2006
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