Is Bank-Centered Corporate Governance Worth it? A Cross-Sectional Analysis of the Performance of Japanese Firms During the Asset Price Deflation

28 Pages Posted: 26 Jul 2000 Last revised: 20 Jul 2022

See all articles by Jun-Koo Kang

Jun-Koo Kang

Nanyang Business School, Nanyang Technological University

René M. Stulz

Ohio State University (OSU) - Department of Finance; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)

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Date Written: October 1997

Abstract

This paper examines the determinants of firm stock-price performance from 1990 to 1993" in Japan. During that period of time, the typical firm on the Tokyo Stock Exchange lost more" than half its value and banks experienced severe adverse shocks. We show that firms whose debt" had a higher fraction of bank loans in 1989 performed worse from 1990 to 1993. This effect is" statistically as well as economically significant and holds when we control for a variety of" variables that affect performance during this period of time. We find that firms that were more" bank-dependent also invested less during this period than other firms. This evidence points to an" adverse effect of bank-centered corporate governance, namely that firms suffer when their banks" are experiencing difficulties.

Suggested Citation

Kang, Jun-Koo and Stulz, Rene M., Is Bank-Centered Corporate Governance Worth it? A Cross-Sectional Analysis of the Performance of Japanese Firms During the Asset Price Deflation (October 1997). NBER Working Paper No. w6238, Available at SSRN: https://ssrn.com/abstract=225996

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Rene M. Stulz

Ohio State University (OSU) - Department of Finance ( email )

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