The book attempts to give a comprehensive description and testable theory of the complicated, but not unintelligible system of bank-firm relationships in the dynamic environment of a gradually deregulated financial market. It provides both theory and empirical evidence that close bank-firm relationships lead to a lower fraction of bank finance. Furthermore it is shown that since the mid 1980s it has been increasingly dependent on the nature of a relationship whether or not it is a benefit for the competitiveness of a firm. These findings make it necessary to redefine the image of Japan's financial system in general and bank-firm relationships in particular.

Klappentext

The author develops a model of bank-firm relationships on the basis of the following general idea: Banks want to prevent moral hazard on the side of their customers. In particular they want to prevent their business customers to use bank credit for purposes different from those that have been negotiated thus damaging the bank's interest. The idea of this model is relatively simple. Banks do not extend a loan if the project for which the money is intended will probably be un­ profitable. They extend the loan if the success of the project is highly probable and if the revenues from that project are greater than the expenses of the bank for monitoring the customer. Assuming as Miarka does that the results from a successful project are certain, this model is an equivalent to minimizing moni­ toring costs. In fact, this is the outcome of the model. The banks are known to monitor their loans. They thereby signal to the capital market that they have tested the project. Therefore, the buyer of bonds of the company on the capital market may rest assured that the project is financially sound. The buyers of bonds thus avoid monitoring costs and can grant better credit conditions than the banks. Pur­ chasers of bor. . ds are free riders on the monitoring of the banks. Miarka tests his model econometrically. The results are amazingly supportive of the model.

Inhalt

Explaining Japanese Bank-Firm Relationships: Introduction and Overview: Introduction; Motivation and Limitations; Research Framework; Overview.- Overview of the Japanese Financial Market: Introduction; Legal and Institutional Framework of Japanese Financial Markets; The Boom-Bust Cycle; Changes in Corporate Finance; Concluding Remarks.- Data Description and Measures of Bank-Firm Relationships: The Data Base; Measures of Bank-Firm Relationships.- Banks as Monitors: Introduction; The Model; Empirical Analysis; Conclusion.- The Recent Economic Role of Bank-Firm Relationships: Introduction; Profitability and Bank-Firm Relationship; Growth Rates; Compensation of Employees; Firm Risk; Interest Rates on Borrowings: Cost and Stability; Summary and Concluding Remarks.- Conclusion.- Appendix.- Abbrevations.- Bibliography.