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Main bank relationships and risk taking in Japanese listed firms

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  • Hideaki Sakawa
  • Naoki Watanabel

Abstract

Bank–firm relationships play a role in the degree of corporate risk taking that guides financing decisions. As such, we study whether the magnitude of corporate risk taking is associated with close bank–firm ties in Japan. To this end, we use data on publicly listed firms from 2007 to 2016 following the bank mergers that occurred in the wake of Japanese financial deregulation, and select risk variables such as idiosyncratic and total risk as proxies for corporate risk taking. The empirical evidence suggests that close bank ties can drive firms to take fewer risks. The results remain unchanged even after controlling for endogeneity. Finally, we observe that smaller firms with higher growth opportunities tend to reduce the degree of corporate risk taking when they form close bank ties.

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  • Hideaki Sakawa & Naoki Watanabel, 2021. "Main bank relationships and risk taking in Japanese listed firms," Applied Economics, Taylor & Francis Journals, vol. 53(9), pages 996-1012, February.
    • Handle: RePEc:taf:applec:v:53:y:2021:i:9:p:996-1012
    DOI: 10.1080/00036846.2020.1820444
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    Citations

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    Cited by:

    1. Ryoichi Arai & Shinichi Hirota, 2023. "Profitability or Longevity? Cross-Country Variations in Corporate Performance," Sustainability, MDPI, vol. 15(10), pages 1-29, May.
    2. Stefan Schmid & Felix Roedder, 2022. "Much ado about diversity? The perpetuation of old elites on corporate boards," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(8), pages 3263-3285, December.
    3. ITO Tadashi & Michael RYAN & TANAKA Ayumu, 2023. "Partial Ownership, Financial Constraint, and FDI," Discussion papers 23020, Research Institute of Economy, Trade and Industry (RIETI).
    4. Hideaki Sakawa & Naoki Watanabel, 2021. "Family Control and Corporate Innovation in Stakeholder-Oriented Corporate Governance," Sustainability, MDPI, vol. 13(9), pages 1-13, April.
    5. Sakawa, Hideaki & Watanabel, Naoki & Yamauchi, Shohei & Liu, Runxi, 2023. "The effect of Tobin's q on investment in a bank-based financial system: Evidence from Japan," Pacific-Basin Finance Journal, Elsevier, vol. 77(C).
    6. Hideaki Sakawa & Naoki Watanabel, 2022. "Accounting Frauds and Main-Bank Monitoring in Japanese Corporations," Journal of Business Ethics, Springer, vol. 180(2), pages 605-621, October.
    7. Naoki Watanabel & Shohei Yamauchi & Hideaki Sakawa, 2022. "The Board Structure and Performance in IPO Firms: Evidence from Stakeholder-Oriented Corporate Governance," Sustainability, MDPI, vol. 14(13), pages 1-15, July.
    8. Hideaki Sakawa & Naoki Watanabel & Junjian Gu, 2021. "The Internationalization and Voluntary Adoption of International Accounting Standards by Japanese MNEs," Management International Review, Springer, vol. 61(5), pages 713-744, October.

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