‘Main’ Bank System, Implicit Contracts and Trust in Deferred Payment Arrangements

  • Hiroshi Osano
  • Toshio Serita
Part of the Studies on the Modern Japanese Economy book series

Abstract

In his theoretical and survey papers, Aoki (1989, 1990) has examined the nature of Japanese firms as a nexus of employment and financial contracts.1 He has suggested the ‘institutional complementarity’ for Japanese firms by which the combination of life-time employment contracts (with deferred compensation plans) and ‘main’ bank relations (with corporate cross-holdings) can provide an efficient mechanism through which individual wealth-risk is diversified and thereby reduced. The ‘main’ bank is conventionally defined as the bank which sustains the largest lending share among private financial institutions that make loans to the firm. Most large Japanese firms have close financial, shareholding and managerial ties with the main bank. The object of this chapter is to explore empirically how financial customer relations (between firms and banks) affect the profile of long-term employment contracts (with deferred compensation plans) in Japanese firms. The research can also shed light on the question of whether the combination of life-time employment contracts and ‘main’ bank relations contribute to good economic performance in Japan.

Keywords

Titanium Transportation Income Milling Expense 

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Copyright information

© Toshiaki Tachibanaki 1994

Authors and Affiliations

  • Hiroshi Osano
  • Toshio Serita

There are no affiliations available

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