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The Number of Bank Relationships and Bank Lending to New Firms: Evidence from firm-level data in Japan

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  • OGANE Yuta

Abstract

This paper examines how the number of bank relationships affects bank lending to new firms using a unique firm-level data set of more than 1,000 small and medium-sized enterprises (SMEs) incorporated in Japan between April 2003 and June 2008. We employ a two-stage least squares (2SLS) estimator—one of the instrumental variables estimators—to address the possible bias caused by omitted variables and/or reverse causality. We find that an increase in the number of bank relationships increases long-term lending to new firms. We also find that this rise may boost total lending to such firms. Furthermore, the findings in this paper suggest that the most significant difference in the effects of the number of bank relationships on bank lending is the difference between a single bank relationship and multiple bank relationships. We show that these results are unlikely to be driven by omitted variables and/or reverse causality.

Suggested Citation

  • OGANE Yuta, 2017. "The Number of Bank Relationships and Bank Lending to New Firms: Evidence from firm-level data in Japan," Discussion papers 17112, Research Institute of Economy, Trade and Industry (RIETI).
    • Handle: RePEc:eti:dpaper:17112
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