The Impacts of "Shock Therapy" on Large and Small Clients:Experiences from Two Large Bank Failures in Japan (Forthcoming in "Pacific-Basin Finance Journal". )

Shin-ichi Fukuda (sfukuda@e.u-tokyo.ac.jp) and Satoshi Koibuchi
Additional contact information
Satoshi Koibuchi: Graduate School of Public Policy, University of Tokyo

No CARF-F-077, CARF F-Series from Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo

Abstract: A "shock therapy" might have different impacts between large and small firms. In this paper, we focus on the clients of two large failed Japanese banks - the Long-term Credit Bank of Japan (LTCB) and the Nippon Credit Bank (NCB). We first show that subsequent events after the bank failures allowed the new LTCB to adopt a "shock therapy" but kept the new NCB to face "soft budget constraints". We then show that the different therapies made performances of these two banks' customers very different. Under the shock therapy, large firms showed significant recovery of their profits but small firms did not. In contrast, under the soft budget constraints, large firms did not show recovery and small firms experienced significant decline in their profits when the new bank terminated the banking relationship.

Pages: 35 pages
Date: 2006-10
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.carf.e.u-tokyo.ac.jp/old/pdf/workingpaper/fseries/78.pdf (application/pdf)

Related works:
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:cfi:fseres:cf077

Access Statistics for this paper

More papers in CARF F-Series from Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo Contact information at EDIRC.
Bibliographic data for series maintained by (carf-info@e.u-tokyo.ac.jp).