Relational Financing as an Institution and its Viability under Competition
Masahiko Aoki and
Serdar Dinc
Working Papers from Stanford University, Department of Economics
Abstract:
May 20, 1997
This paper presents a new, generic definition of relational financing that may cover a wide range of financial practices in different economies, ranging from the Japanese main bank relationship, to bank lending to smaller firms, and venture capital in the U.S. It then discusses various incentives of the financier to commit to relational financing and reviews the recent literature on issues about how those incentives are affected by increasing competition. One useful insight is that increasing competition is not necessarily harmful to relational financing. It then applies theoretical insights to problems of institutional transition in two Asian economies. It argues that the Japanese financial system will retain some aspects of relational financing even after the impending financial deregulation, although there will be a significant reduction in the bank's role in corporate governance. Finally, it assesses that the ongoing experiment of main bank relationship in China may be one of viable financial options for successful transition of the planned economy to a market economy, but cautions that more competition in the banking sector is necessary for relational banking to emerge as an institution.
Date: 1997-05-20
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)
Downloads: (external link)
http://www-econ.stanford.edu/faculty/workp/swp97011.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www-econ.stanford.edu/faculty/workp/swp97011.pdf [301 Moved Permanently]--> https://www-econ.stanford.edu/faculty/workp/swp97011.pdf [307 Temporary Redirect]--> https://economics.stanford.edu//faculty/workp/swp97011.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:wop:stanec:97011
Access Statistics for this paper
More papers in Working Papers from Stanford University, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Thomas Krichel ().