Anmerkungen:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments March 15, 2010 erstellt
Beschreibung:
This paper shows how main bank rent extraction affects corporate decisions about investment and financing in a changing regulatory environment, and how an equity market boom can ominously increase bank risk during the transition from a relationship-oriented financial system to a transaction-based competitive system. Our model predicts that main bank control tends to produce overinvestment by the client firm. This overinvestment, however, is initially contained by the shortage of loanable funds, even when new equity is available to the firm. Abundant loanable funds facilitate overinvestment to the detriment of firm profitability. The shift of control rights back to the firm due to the financial deregulation undercuts the bank influence only to increase bank risk, because the ex ante rational bank is left financing projects with higher downside risk. The high-flying equity market further lowers costs of new equity and aggravates the “equity for growth and bank debt for downside risk” bias. This makes the bank harder than ever to diversify its risk. The insights of this paper help shed light on why Japan's main bank system was beneficial in the postwar (capital constrained) period, but became harmful during the (capital abundant and bubble-laden) 1980s, and why the adverse shocks of the post-deregulation 1990s had such severe effects on the banking system