The Real Effects of Asset Market Bubbles: Loan- and Firm-Level Evidence of a Lending Channel
47 Pages Posted: 9 Feb 2007
There are 3 versions of this paper
The Real Effects of Asset Market Bubbles: Loan- and Firm-Level Evidence of a Lending Channel
The Real Effects of Asset Market Bubbles: Loan- and Firm-Level Evidence of a Lending Channel
The Real Effects of Asset Market Bubbles: Loan- and Firm-Level Evidence of a Lending Channel
Abstract
This paper studies how a shock to the financial health of banks, caused by a decline in the asset markets, affects the real economy. The land-market collapse in Japan provides an ideal testing field in separating the impact of a loan supply shock from demand shocks. I find that banks with greater real estate exposure have to reduce lending. Firms' investment and market valuation are negatively associated with their top lender's real estate exposure. The lending channel is economically important: it accounts for one-third of lending contraction, one-fifth of the decline in investment, and a quarter of value loss.
Keywords: Bank liquidity shock, Bank health, Bank relationships, Lending channel, Japanese economy
JEL Classification: G21, C41
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
By Takeo Hoshi, Anil K. Kashyap, ...
-
Do Banking Shocks Affect Borrowing Firm Performance? An Analysis of the Japanese Experience
By Jun-koo Kang and René M. Stulz
-
Zombie Lending and Depressed Restructuring in Japan
By Ricardo J. Caballero, Takeo Hoshi, ...
-
Zombie Lending and Depressed Restructuring in Japan
By Ricardo J. Caballero, Takeo Hoshi, ...
-
The Japanese Banking Crisis: Where Did it Come from and How Will it End?
By Takeo Hoshi and Anil K. Kashyap
-
The Japanese Banking Crisis: Where Did it Come from and How Will it End?
By Takeo Hoshi and Anil K. Kashyap
-
Banks, Ownership Structure, and Firm Value in Japan
By Randall Morck, Anil Shivdasani, ...
-
Unnatural Selection: Perverse Incentives and the Misallocation of Credit in Japan
By Joe Peek and Eric S. Rosengren
-
Impacts of the Basle Capital Standard on Japanese Banks' Behavior