The Role of Banks in Reducing the Costs of Financial Distress in Japan / Takeo Hoshi, Anil Kashyap, David Scharfstein.

Format:

Book

Author/Creator:

Hoshi, Takeo.

Contributor:

National Bureau of Economic Research.

Kashyap, Anil.

Scharfstein, David.

Series:

Working Paper Series (National Bureau of Economic Research) no. w3435.

NBER working paper series no. w3435

Language:

English

Subjects (All):

Banks and banking, Japanese.

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1990.

Cambridge, Massachusetts : National Bureau of Economic Research, 1990.

Summary:

This paper explores the idea that financial distress is costly because free-rider problems and information asymmetries make it difficult for firms to renegotiate with their creditors in times of distress. We present evidence consistent with this view by showing Japanese firms with financial structures in which free-rider and information problems are likely to be small perform better than other firms in industrial groups-those with close financial relationships to their banks, suppliers, and customers-invest more and sell more after the onset of distress than non-qroup firms. Moreover, firms that are not group members, but nevertheless have strong ties to a main bank also invest and sell more than firms without strong bank ties.

Notes:

Print version record

September 1990.