Forbearance Lending: The Case of Japanese Firms

Toshitaka Sekine, Keiichiro Kobayashi and Yumi Saita
Additional contact information
Yumi Saita: Bank of Japan

Monetary and Economic Studies, 2003, vol. 21, issue 2, 69-92

Abstract: After the collapse of the asset price bubble, Japanese banks are said to refinance firms, even in cases where there is little prospect of firms repaying the loans extended. This phenomenon is known as " forbearance lending." We find the evidence which is consistent with the view that forbearance lending certainly took place, and that it suppressed the profitability of inefficient nonmanufacturing firms. First, contrary to the usual expectation, we find that outstanding loans were apt to increase to a firm whose debt-asset ratio exceeded a certain level: after the bubble burst, this nonlinear relationship between loans and debt-asset ratios became evident for nonmanufacturing firms, especially those in the construction and real estate industries. Furthermore, we also find that an increase in loans to highly indebted firms in these industries lowered their profitability.

JEL-codes: G21 G32 (search for similar items in EconPapers)
Date: 2003
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (122)

Downloads: (external link)
http://www.imes.boj.or.jp/research/papers/english/me21-2-3.pdf (application/pdf)

Related works:
Working Paper: Forbearance Lending: A Case for Japanese Firms (2002)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ime:imemes:v:21:y:2003:i:2:p:69-92

Access Statistics for this article

More articles in Monetary and Economic Studies from Institute for Monetary and Economic Studies, Bank of Japan Contact information at EDIRC.
Bibliographic data for series maintained by Kinken ().