The Role of Banks in Reducing the Costs of Financial Distress in Japan

Takeo Hoshi, Anil Kashyap and David Scharfstein

No 3435, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper explores the idea that financial distress is costly because free-rider problems and information asymmetries make it difficult for firms to renegotiate with their creditors in times of distress. We present evidence consistent with this view by showing Japanese firms with financial structures in which free-rider and information problems are likely to be small perform better than other firms in industrial groups-those with close financial relationships to their banks, suppliers, and customers-invest more and sell more after the onset of distress than non-qroup firms. Moreover, firms that are not group members, but nevertheless have strong ties to a main bank also invest and sell more than firms without strong bank ties.

Date: 1990-09
Note: ME
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (513)

Published as Journal of Financial Economics Volume 27 1990, pp. 67-88 September 1990

Downloads: (external link)
http://www.nber.org/papers/w3435.pdf (application/pdf)

Related works:
Journal Article: The role of banks in reducing the costs of financial distress in Japan (1990)
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:nbr:nberwo:3435

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w3435

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().