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International Economics and Economic Policy

, Volume 2, Issue 4, pp 337–362 | Cite as

Japanese Banks’ monitoring activities and the performance of borrower firms: 1981–1996

  • Kyoji Fukao
  • Kiyohiko G. Nishimura
  • Qing-Yuan Sui
  • Masayo Tomiyama
Original Paper

Abstract

We construct an index measure that quantitatively describes the monitoring activities of Japanese banks. Using micro data on Japanese banks and borrower firms, we examine the effects of bank monitoring on the profitability of borrower firms. We find significant positive effects in the periods 1986–1991 and 1992–1996, although there is no significant effect in the period 1981–1985. We also examine how banks’ monitoring affects borrowers. The results show that the positive effects of banks’ monitoring on borrowers’ profitability are mostly caused by screening effects, not performance-improving effects.

Keywords

Main banks Bank monitoring Quantitative measure Screening effects Performance-improving effects 

JEL

G21 G28 

Notes

Acknowledgements

The authors are grateful for the comments by Joe Peek, Robert M. Stern, Gary R. Saxonhouse, Takeo Hoshi and other participants at the October 2004 conference in Ann Arbor.

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Copyright information

© Springer-Verlag 2005

Authors and Affiliations

  • Kyoji Fukao
    • 1
  • Kiyohiko G. Nishimura
    • 2
  • Qing-Yuan Sui
    • 3
  • Masayo Tomiyama
    • 4
  1. 1.Institute of Economic ResearchHitotsubashi University and RIETITokyoJapan
  2. 2.Faculty of EconomicsUniversity of TokyoTokyoJapan
  3. 3.Faculty of Economics and Business AdministrationYokohama City UniversityYokohamaJapan
  4. 4.Institute of Economic ResearchHitotsubashi UniversityTokyoJapan

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