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Relationships Matter: the Impact of Bank-Firm Relationships on Mergers and Acquisitions in Japan

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  • Joseph J. French

    (University of Northern Colorado)

  • Juxin Yan

    (Hitotsubashi University)

  • Yukihiro Yasuda

    (Hitotsubashi University)

Abstract

We examine the influence of bank-firm relationships on mergers and acquisitions (M&As) in Japan. This examination dissects the effect of firms’ linkages with banks through lending, director, and ownership relationships. This study uses a comprehensive data set that spans the period from 2000 to 2015 to show that bank-firm relationships generally increase the likelihood and size of an M&A. Contrary to conventional wisdom on the adverse effects of these relationships, such as zombie lending, our results indicate that Japanese banks facilitated restructuring and international expansion in the 2000s. However, in cases where a bank plays a dual role as a lender and shareholder to an acquirer, the likelihood and size of the M&A declines. This result stems from a bank’s desire to maintain corporate governance mechanisms and control rights.

Suggested Citation

  • Joseph J. French & Juxin Yan & Yukihiro Yasuda, 2019. "Relationships Matter: the Impact of Bank-Firm Relationships on Mergers and Acquisitions in Japan," Journal of Financial Services Research, Springer;Western Finance Association, vol. 56(3), pages 259-305, December.
    • Handle: RePEc:kap:jfsres:v:56:y:2019:i:3:d:10.1007_s10693-019-00327-3
    DOI: 10.1007/s10693-019-00327-3
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    More about this item

    Keywords

    Mergers and acquisitions; Bank-firm relationship; Japan;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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