Japanese firms in financial distress and main banks: Analyses of interest-rate premia

Masahiro Kawai, Juro Hashimoto, Shigemi Izumida

Research output: Contribution to journalArticlepeer-review

22 Citations (Scopus)

Abstract

The main bank system can play an important financial role for Japanese firms in distress by alleviating the firm's financial cost. First, firms pay positive premia on interest rates at the time of financial distress. Second, firms with positive bank borrowing tend to pay significantly lower though still statistically significantly positive interest-rate premia, in periods of financial distress than do firms with zero bank borrowing. Third, if we focus on firms with positive bank borrowing, firms with main banks pay significantly lower interest-rate premia than do firms without main banks. Fourth, the discounting notes receivable, due to intra-firm trade credit, plays an important role for liquidity-constrained firms without main banks.

Original languageEnglish
Pages (from-to)175-194
Number of pages20
JournalJapan and the World Economy
Volume8
Issue number2
DOIs
Publication statusPublished - 1996 Jun
Externally publishedYes

Keywords

  • Financial distress
  • Interest-rate premia
  • Main banks

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics
  • Political Science and International Relations

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