Bank size and lending relationships in Japan
By: Hirofumi Uchida, Gregory F.Udell, Wako Watanabe.
Contributors: Udell, Gregory F., 1946-; Watanabe, Wako, 1973-; National Bureau of Economic Research.
Series: NBER working paper series -- no. 13005.; Working paper series (National Bureau of Economic Research) -- working paper no. 13005.
Publisher: National Bureau of Economic Research
Published: 2007
Place of publication: Cambridge, Mass
Language: eng
Number of pages: 32
Subjects: Banks and banking -- Japan; Banks and banking -- United States; Bank loans -- Japan; Bank loans -- United States
Description: Current theoretical and empirical research suggests that small banks have a comparative advantage in processing soft information and delivering relationship lending. The most comprehensive analysis of this view found using U.S. data that smaller SMEs borrow from smaller banks and smaller banks have stronger relationships with their borrowers (Berger, Miller, Petersen, Rajan, and Stein 2005) (BMPRS). We employ essentially the same methodology as BMPRS on a unique Japanese data set and obtained findings that are quite interesting from an international comparison point of view. We found like BMPRS that larger firms tend to borrow from larger banks. However, unlike BMPRS we did not find that this was because larger firms are more transparent. Together these results imply that large banks do not necessarily have a comparative advantage in extending transactions-based lending. We also found like BMPRS that smaller banks have strong relationships with their borrowers. However, we find that banking relationships in the U.S. and Japan are strong in somewhat different dimensions. Our paper clarifies these and other interesting similarities and differences between the U.S. and Japan..
Notes: "April 2007"

Includes bibliographical references (p. 30-32).

Also available in PDF from the NBER world wide web site (www.nber.org).