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Do bank-firm relationships reduce bank debt? Evidence from Japan

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Listed:
  • Tobias Miarka
  • Michael Troge

Abstract

The paper analyses how close relationships to banks influence a firm's choice of financing its debt through publicly marketed bonds or bank loans. It is shown that large Japanese firms use less bank debt, if banks own shares in the firm or bank employees are members of the firm's board. This result supports a theoretical framework, where banks are able to control agency problems associated with debt. Firms use bank loans in order to be monitored, which enables them to access cheaper bond finance. Closer bank-firm relationships facilitate monitoring for the bank and reduce therefore the need for bank finance.

Suggested Citation

  • Tobias Miarka & Michael Troge, 2005. "Do bank-firm relationships reduce bank debt? Evidence from Japan," The European Journal of Finance, Taylor & Francis Journals, vol. 11(1), pages 75-92.
    • Handle: RePEc:taf:eurjfi:v:11:y:2005:i:1:p:75-92
    DOI: 10.1080/1351847032000168687
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    References listed on IDEAS

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