Revelation of Private Information about Unpaid Notes in the Trade Credit Bill System in Japan

Toshihiro Matsumura and Marc Ryser

The Journal of Legal Studies, 1995, vol. 24, issue 1, 165-87

Abstract: This article examines a unique Japanese extralegal enforcement system. We discuss how banks in Japan reveal private information about unpaid notes through a joint clearinghouse. We use a 2-period model with asymmetric information between insiders and outside investors, in which banks choose whether or not to reveal information about the unpaid notes of their clients. Banks are constrained in their choice by the institution of a clearinghouse, which assigns reporting duties and imposes penalties on banks that shirk. We demonstrate that full revelation will occur under one type of assignment of reporting duties, which has been adopted in Japan. Copyright 1995 by the University of Chicago.

Date: 1995
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Persistent link: https://EconPapers.repec.org/RePEc:ucp:jlstud:v:24:y:1995:i:1:p:165-87

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