Endogenous Relationship Banking to Alleviate Excessive Screening in Transaction Banking

This paper analyzes how learning a borrower's creditworthiness, from past lending decision by a rival bank that is publicly observable through private or public credit reporting systems, affects the performance of subsequent lending competitions. Our analysis of twicerepeated lending competitions demonstrates that such ex post information sharing causes inefficient and excessive screening of new borrowers when banks undertake transaction banking since each bank expects future disadvantages to result from the information revelation. Relationship banking arises endogenously as a defense against such anticipated disadvantage, and improves the economic efficiency by alleviating the excessive screening.relationship banking, informational externality, interbank competition, commonvalue, repeated auction

Is Academic Science Driving a Surge in Industrial Innovation? Evidence from Patent Citations

What is driving the remarkable increase over the last decade in the propensity of patents to cite academic science? Does this trend indicate that stronger knowledge spillovers from academia have helped power the surge in innovative activity in the U.S. in the 1990s? This paper seeks to shed light on these questions by using a common empirical framework to assess the relative importance of various alternative hypotheses in explaining the growth in patent citations to science. Our analysis supports the notion that the nature of U.S. inventive activity has changed over the sample period, with an increased emphasis on the use of the knowledge generated by university-based scientists in later years. However, the concentration of patent-to-paper citation activity within what we call the "bio nexus" suggests that much of the contribution of knowledge spillovers from academia may be largely confined to bioscience-related inventions.

Lending Competition, Relationship Banking, and Credit Availability for Entrepreneurs

Existing theories consistently predict that relationship banking enhances credit availability for new firms. To put more concretely, these theories predict that soft information acquisition about borrowers' creditworthiness and the resulting incumbent lender's profit-improving and relation-specific consulting ability yield a monopolistic rent for the incumbent lender, and that this expected rent encourages a bank to lend to younger firms to pre-empt an exclusive relationship ahead of rival banks. The present study tries to provide evidence for this hypothesis using a dataset collected from the 2003 Survey of the Financial Environment of Enterprises in Japan. Our statistical analysis shows that the time interval from start-up to the first loan approval for a firm is shorter if a bank intends to undertake relationship banking, even after controlling fund-demand and creditworthiness factors of each firm. This result provides evidence to support the above hypothesis. Our logit analysis shows that the probability for banks to undertake relationship banking is decreasing or hump-shaped against the number of competing banks. Thus, the increase in the number of competing banks is more likely to discourage these banks from providing relationship banking, and this in turn diminishes credit availability for new firms. Besides such an effect arising from relationship banking, the data shows evidence suggesting the statistical significance of another mechanism generating a negative correlation between the number of competing banks and credit availability for new firms, which may be explained by the theory of winner's curse. As a whole, credit availability for new firms was higher in more concentrated local credit markets in the last fifteen years in Japan.

Analysis of the Socioeconomic Difficulties Affecting the Suicide Rate in Japan

This paper focuses on the drastic increase observed in the Japanese male suicide rate in the late 1990s and early 2000s and confirms unemployment and personal bankruptcy to be the associated socioeconomic factors behind the male suicide variation. Personal bankruptcy is also confirmed to be significant in the female suicide variation. The relationship is confirmed through a pooled data analysis by a middle-aged group and by prefecture. Further, the paper focused on the association between the unemployment rate and suicide mortality by incorporating the reasons for unemployment in the monthly regression. Next, we identified a significant association between male suicide variations and changes in some of the reasons for being unemployed. The interpretation of the results implies that the risk of unemployment among men has been mitigated by the unemployment insurance rather than the bias in the reasons reported and/or mental disorder in Japan.

An Estimation of the Inside Bank Premium

This paper is an empirical examination of the existence of the inside bank premium arising from relationship banking, which is predicted in the extant theoretical models. These models predict that the contracted interest rate of a loan extended by an inside bank when there exist asymmetries between the inside bank and outside banks, such as the information advantage of the inside bank or the implicit insurance and other borrower-specific services exclusively provided by the inside bank, is higher than that without such asymmetries. Our statistical estimations are based on the dataset collected through the survey for small and medium-sized firms in Japan, which were designed to contain the questions about a firm's loan application process, and the agreed-upon loan terms that are crucial to our tests. Our estimations show that such an inside bank premium is 30-50 basis points on average for short-term loans. This is economically significant for the median short-term interest rate of 1.9 %. The subsample regressions show that this premium is more likely to come from the implicit insurance and that this premium is more significant for smaller inside banks in more competitive loan markets.

Report on a Fact-Finding Survey of the Credit-Decision System and Loan Pricing in Small Business Financing in Japan

In this paper, we report the findings from an interview survey on the system and process of lending decisions and loan pricing, as well as the information that is used in such processes. The survey targeted 19 regional financial institutions, including regional banks and cooperative institutions in Japan. We found that soft information is used in lending decisions but is rarely used directly in loan pricing, and found that each branch exercises greater discretion in loan pricing. Soft information affects loan pricing indirectly through each bank's internal credit rating process. Loan officers at a bank usually revise the financial statements submitted by client firms using soft information in order to more accurately reflect the actual conditions.

Lending Competition and Relationship Banking: Evidence from Japanese Prefectural Level Data

The question of whether more competition among banks increases relationship banking, which is predicted to improve credit availability for informationally opaque firms in theory, is a controversial issue in the banking literature. By using firm-level survey data in Japan, this paper provides evidence for the negative correlation between lending competition and the provision of relationship banking . This paper raises the question whether fierce interbank competition is always beneficial for small firms

Lending Competition and Relationship Banking: Evidence from Japan

The question of whether more competition among banks increases relationship banking, which is predicted to improve credit availability for informationally opaque firms in theory, is a controversial issue in the banking literature. By using firm-level survey data in Japan, this paper provides evidence for the negative correlation between lending competition and the provision of relationship banking . This paper raises the question whether fierce interbank competition is always beneficial for small firms

Lending Competition and Relationship Banking: Evidence from Japanese Prefectural Level Data

The question of whether more competition among banks increases relationship banking, which is predicted to improve credit availability for informationally opaque firms in theory, is a controversial issue in the banking literature. By using firm-level survey data in Japan, this paper provides evidence for the negative correlation between lending competition and the provision of relationship banking . This paper raises the question whether fierce interbank competition is always beneficial for small firms