On the Bank-led Rescues Financially Distressed Firms in Japan

Kentaro Iwatsubo, 健太郎 岩壷 and ケンタロウ イワツボ

No 2004-25, CEI Working Paper Series from Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University

Abstract: In this paper, we argue that the bank-led rescues of financially distressed firms in the heyday of the main bank system was inefficient since banks' implicit guarantee against bankruptcy resulted in moral hazard. The empirical results show that during the period before the financial deregulation of the 1980s main bank client firms retrenched operational expenses and improved corporate performance significantly less than the firms without close bank ties after the onset of financial distress. This evidence suggests that managers of bank-affiliated firms tended to do away with sharp downsizing by relying on financial support from their main bank.

Pages: 33 pages
Date: 2005-03
Note: First version: March 2003; This version: Sep. 2004
References: Add references at CitEc
Citations:

Downloads: (external link)
https://hermes-ir.lib.hit-u.ac.jp/hermes/ir/re/13877/wp2004-25a.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:hit:hitcei:2004-25

Access Statistics for this paper

More papers in CEI Working Paper Series from Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University Contact information at EDIRC.
Bibliographic data for series maintained by Reiko Suzuki ( this e-mail address is bad, please contact ).