Corporate financing and product market competition: evidence from firm-level data in Japan

This paper investigates the link between external financing and product market competition by focusing on different maturity structures. Using firm-level data for Japanese manufacturing firms over the period 1990-1995, we find that long-term loans enable firms to compete aggressively at a level below profit maximization. By contrast, short-term loans are not related to product market competition. Our results suggest that long-term loans play an important role in investment in market share for long-term profits through lowering prices.debt financing, price-cost margin

Corporate Governance and the Costs of Public Debt Financing: Evidence from Japan

This paper explores the relation between corporate governance mechanisms in Japan and the costs of public debt financing. Using a sample of Japanese corporate bond issues during the period 2005-2008, we find that CEO ownership is associated with higher yield spreads after controlling for firm- and bond-specific characteristics. Founding family ownership is also positively related to yield spreads. In contrast, firms with large corporate shareholders enjoy lower yield spreads. These results are robust to various alternative specifications. Overall, our results indicate that corporate governance mechanisms in Japan are important factors affecting the costs of public debt financing.Yield spreads; Ownership structure; Corporate governance

Managerial Entrenchment, Banker Distribution, and Corporate Governance: Evidence from Japan

This paper investigates whether managerial entrenchment of controlling shareholders affects the distribution of bankers to the boards of Japanese manufacturing firms. Bankers are not likely to be appointed to firms with large corporate shareholders as controlling shareholders because large corporate shareholders have incentives to entrench managers. Moreover, in the aftermath of executive appointments of banks and large corporate shareholders, restructuring and improved performances of the appointing firms are facilitated. The results suggest that managerial entrenchment of large corporate shareholders generates the substitution of role of corporate governance between banks and large corporate shareholders.Corporate governance; Managerial entrenchment; Controlling shareholders; Banks

Does Trade Credit Provides Favorable Information to Banks? Evidence from Japan

This paper examines whether trade credit as a credible signal about firmfs creditworthiness to banks facilitates provision of bank credit to the firms receiving trade credit. Using data on Japanese manufacturing firms over the period 1990-1995, we find that firms receiving trade credit are provided short-term credit by less-informed banks. Consequently, in the firms that have armfs-length relations with banks, trade credit plays an important role in mitigating asymmetric information problems between firms and banks, thereby facilitating extension of bank credit.Trade Credit; Bank Credit

Managerial Entrenchment and Corporate Bond Financing: Evidence from Japan

This paper investigates whether managerial entrenchment of controlling shareholders affects corporate bond financing. Using data on Japanese manufacturing firms, we find that firms with controlling shareholders issue less straight corporate bonds than other firms. The results show that managerial entrenchment of controlling shareholders has an influential impact on corporate bond financing.Managerial entrenchment; Large corporate shareholders; Corporate bonds

The Global Financial Crisis and Small- and Medium-sized Enterprises in Japan: How did they cope with the crisis?

In this paper, we examine the nature of the shocks that hit the small- and medium-sized enterprises (SMEs) in Japan during the global financial crisis that occurred in the wake of the massive number of non-performing subprime loans in the U.S. We examine how the SMEs responded to the shocks, using the unique surveys that were conducted by the Research Institute of Economy, Trade and Industry (RIETI) in 2008 and 2009. The shocks were identified as demand, supply and financial shocks. The demand shock was the most prevalent, while the financial shock was the least frequent. The SMEs took a spectrum of measures against the demand shock by seeking help from suppliers and financial institutions. We find that the measures taken by the SMEs crucially depended on the bank-firm relationship, but not on the customer-supplier relationship. The bank-dependent SMEs asked their closely-affiliated financial institutions for help, while the SMEs that were less dependent on financial institutions sought help primarily from their suppliers.