The Real Effects of Bank-Driven Termination of Relationships: Evidence from Loan-level Matched Data

Nakashima, Kiyotaka and Takahashi, Koji (2016): The Real Effects of Bank-Driven Termination of Relationships: Evidence from Loan-level Matched Data.

Abstract

We examine the effects of bank-driven terminations of bank-borrower relationships on the investments of borrowing firms by exploiting a matched dataset of Japanese banks and listed firms from 1991 to 2010. We find that while bank-driven terminations do not always affect investment, they do when the firms facing termination have difficulty in either establishing a new relationship or increasing borrowings within their existing relationship. Our findings coincide with the prediction of existing theoretical models whereby financial frictions in a matching process in credit markets play an important role in firm investment.

• Item Type: MPRA Paper
• Language: English
• Keywords: matched lender-borrower data, relationship termination, switching of relationships, establishment of new relationships.
• Subjects: G - Financial Economics > G0 - General > G01 - Financial Crises; G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages; G - Financial Economics > G2 - Financial Institutions and Services > G28 - Government Policy and Regulation

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