 Main Bank Relationships, Debt Structure, and Innovation in JapanHai-Chin Yu () and
Phuong Dung Tong ()
Chapter 24 in Encyclopedia of Finance, 2022, pp 791-818 from Springer Abstract: Abstract This study investigates how a firm’s debt structure and the presence of keiretsu main bank relationship conjointly shape a firm’s innovation in Japan. Using a 2SLS regression in which corporate debt structure is endogenous, we find that public debt fosters innovation, and bank debt destroys innovation. However, keiretsu main bank relationships can mitigate the negative effect of bank debt. Once a firm is affiliated with a keiretsu, the main bank relationship helps generate 1.57% (or 3.8 more patents) innovation. We explain the plausible reasons are main bank’s relationships provide more financial flexibility and risk tolerance to their affiliated firms. Besides, the ownerships of main banks held for their member firms also align the banks’ roles with acting more like shareholders than creditors. We identify the causal relation using the event of keiretsu consolidation; the DID (difference-in-differences) results show that the consolidated keiretsu raise more innovation among their member firms by 2.87% after the merger compared to the counterparts. Some further tests show the results are robust. Keywords: Innovation; Debt structure; Bank debt; Public debt; Main bank (search for similar items in EconPapers) There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-030-91231-4_114 Ordering information: This item can be ordered from DOI: 10.1007/978-3-030-91231-4_114 Access Statistics for this chapter More chapters in Springer Books from Springer |
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