Japan's Banking Crisis: Who Has the Most to Lose?
40 Pages Posted: 25 Jun 2004
Date Written: June 2004
Abstract
Japan experienced a deep and prolonged banking crisis in the 1990s. In this Paper, we attempt to identify the characteristics of companies which have the most to lose from the banks' malaise. Using stock price data, we calculate abnormal returns of non-financial companies around significant dates in the history of the banking crisis, starting in 1995. The events we study include various government actions to address the crisis, downgrading of banks by international rating agencies, and bank mergers. We find that not all companies are equally sensitive to events in the banking sector. The most affected are small companies with low profits, in low-tech sectors, with high leverage and limited access to bond markets. These findings are consistent with macroeconomic 'credit crunch' theories according to which small companies with limited reputation are the most affected when banks reduce lending. Our results are also in line with theories suggesting that bank debt is not very important for financing innovation.
Keywords: Japan's banking crisis, bank-firm relations, event study
JEL Classification: G10, G21, G30
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