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The Real Effects of Bank-Driven Termination of Relationships: Evidence from Loan-level Matched Data

Kiyotaka Nakashima () and Koji Takahashi ()

MPRA Paper from University Library of Munich, Germany

Abstract: We examine the effects of bank-driven terminations of bank-borrower relationships on the investments of borrowing firms by exploiting a matched dataset of Japanese banks and listed firms from 1991 to 2010. We find that while bank-driven terminations do not always affect investment, they do when the firms facing termination have difficulty in either establishing a new relationship or increasing borrowings within their existing relationship. Our findings coincide with the prediction of existing theoretical models whereby financial frictions in a matching process in credit markets play an important role in firm investment.

Keywords: matched lender-borrower data; relationship termination; switching of relationships; establishment of new relationships. (search for similar items in EconPapers)
JEL-codes: G01 G21 G28 (search for similar items in EconPapers)
Date: 2016-01-16
New Economics Papers: this item is included in nep-ban and nep-cfn
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Journal Article: The real effects of bank-driven termination of relationships: Evidence from loan-level matched data (2018) Downloads
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