Cover IMF Working Papers
Firm Investment and Balance-Sheet Problems in Japan
Author: Mr. Toshitaka Sekine
Series:
IMF Working Papers
Volume/Issue:
Volume 1999: Issue 111
Language:
English
Publication Date:
01 Aug 1999
DOI:
https://doi.org/10.5089/9781451853452.001
ISBN:
9781451853452
ISSN:
1018-5941
Pages:
32
Keywords:
WP; firm; balance-sheet condition; investment behavior; investment; credit channel; dynamic panel data; Japan; issuing firm; balance-sheet variable; over-the-counter market firm; Bonds; Nonperforming loans; Credit; Capital adequacy requirements; Bank credit
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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This paper investigates whether balance-sheet conditions of firms and their main banks matter for firm investment behavior using dynamic corporate panel data in Japan for the period 1985-95. It finds that smaller non-bond issuing firms were facing liquidity constraints; these firms’ balance-sheet conditions (the debt asset ratios) affected their investment from the midst of the bubble era by influencing main banks’ lending to them; and the deterioration of their main banks’ balance-sheet conditions constrained these firms’ investment from about 1993. These findings highlight the potential macroeconomic impact and importance of the credit channel of monetary policy, and support the case of a credit crunch facing small Japanese firms during this period.
Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund

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