Japan's Banking Crisis: Who Has the Most to Lose?

40 Pages Posted: 25 Jun 2004

See all articles by Hideaki Miyajima

Hideaki Miyajima

Waseda University - Graduate School of Commerce; Research Institute of Economy, Trade and Industry (RIETI)

Yishay Yafeh

Hebrew University of Jerusalem - Jerusalem School of Business Administration; European Corporate Governance Institute (ECGI); Centre for Economic Policy Research (CEPR)

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

Miyajima, Hideaki and Yafeh, Yishay, Japan's Banking Crisis: Who Has the Most to Lose? (June 2004). Available at SSRN: https://ssrn.com/abstract=558626

Hideaki Miyajima (Contact Author)

Waseda University - Graduate School of Commerce ( email )

1-6-1, Nishi-Waseda
Shinjuku-ku, Tokyo 169-8050
Japan
(81 3) 5286 2019 (Phone)
(81 3) 3203 7067 (Fax)

Research Institute of Economy, Trade and Industry (RIETI) ( email )

1-3-1 Kasumigaseki
Chiyoda-ku
Tokyo 100-8901
Japan

Yishay Yafeh

Hebrew University of Jerusalem - Jerusalem School of Business Administration ( email )

Mount Scopus
Jerusalem 91905
Israel
+972 2 588 3081 (Phone)
+972 2 588 1341 (Fax)

HOME PAGE: http://bschool.huji.ac.il/facultye/yafeh/

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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