The effect of bank recapitalization policy on credit allocation, investment, and productivity : evidence from a banking crisis in Japan
Hiroyuki Kasahara, Yasuyuki Sawada, Michio Suzuki
This paper examines the ramification of government capital injections into financially distressed banks during the 1997 Japanese banking crisis. By leveraging a unique dataset merging firm-level financial statements and bank balance sheets, the study aims to examine whether the capital injections primarily benefited high-productivity firms or were misallocated to struggling "zombie" firms. The empirical results suggest that banks, post-injection, increased lending to both high-productivity non-zombie firms and low-productivity zombie firms. While the former is in line with conventional theories that prioritize high-productivity firms for investment and productivity enhancement, the latter suggests credit misallocation towards struggling firms mainly for debt servicing. Intriguingly, the study finds no evidence that these injections promoted investments among firms, irrespective of their productivity or financial health status. In particular, we provide suggestive evidence that zombie firms even reduced investments, especially in infrastructure, while high-productivity non-zombie firms did not exhibit a significant investment boost despite receiving more loans. However, these high-productivity firms displayed positive growth in labor productivity and total factor productivity, potentially driven by sales growth and increased advertisement expenses rather than employment and wage adjustments.
Year of publication: |
August 2023
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Authors: | Kasahara, Hiroyuki ; Sawada, Yasuyuki ; Suzuki, Michio |
Publisher: |
Munich, Germany : CESifo |
Subject: | capital injection | bank regulation | banking crisis | total factor productivity | Zombie | Bankenkrise | Banking crisis | Bankenregulierung | Bank regulation | Produktivität | Productivity | Japan | Kreditgeschäft | Bank lending | Bankenaufsicht | Banking supervision | Finanzkrise | Financial crisis | Bank | Investition | Investment |
Saved in:
freely available
Extent: | 1 Online-Ressource (circa 67 Seiten) Illustrationen |
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Series: | CESifo working papers. - München : [Verlag nicht ermittelbar], ISSN 2364-1428, ZDB-ID 2065232-X. - Vol. 10622 (2023) |
Type of publication: | Book / Working Paper |
Type of publication (narrower categories): | Graue Literatur ; Non-commercial literature ; Arbeitspapier ; Working Paper |
Language: | English |
Other identifiers: | hdl:10419/279373 [Handle] |
Classification: | E22 - Capital; Investment (including Inventories); Capacity ; G21 - Banks; Other Depository Institutions; Mortgages ; G28 - Government Policy and Regulation |
Source: | ECONIS - Online Catalogue of the ZBW |
Persistent link: https://www.econbiz.de/10014334373