Bank Power and Cash Holdings: Evidence from Japan
Year: 2001
Type: article
Abstract: Using a sample of firm years from the United States, Germany and Japan, we examine the effect of bank power on the cash holdings of industrial firms. We show that firms in Japan have higher cash holdings than those in the US or Germany. We also show that the high cash levels are correlated with power of the banks. During periods of high bank power, firms' cash holdings are consistent with banks extracting rents. We conclude that the Japanese banks persuade firms to hold higher cash balances than firms in the US and Germany. This is contrary to widely held beliefs about the Japanese governance system.
Source: Review of Financial Studies
Authors: Lee Pinkowitz, Rohan Williamson
Institution: Georgetown University
Language: English
Subfield: Accounting
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W3121452736