An explanation of main bank relationship in japan

Submitted by: Ryan

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And also, it will discuss the importance of the main bank relationship as a means of risk-sharing by comparing the correlation between financial expenses and the operating profits of specific companies with the degree of their dependence on main banks. First, it is necessary to define what a Japanese "main bank" isThe "main bank" is defined as the "financial group" ("kinyu keiretsu" in japanese) in the paper"Financial group" is defined in principle by the amount of financing that a bank supplies to a particular borrowing companyWhen a given company has taken out the largest amount of loans from a particular bank for the past three or more years consecutively, the company is viewed as belonging to that bank's "financial group." Nearly all the companies listed in the first section of Tokyo Stock Exchange have a main bankHowever, these companies borrow not just from their main bank, but from a large number of other banks and financial institution as wellWhile the main bank is an important lender, the company must also rely on loans from the main bank's competitors which in sum far exceed those from the main bank itself. Although the generally accepted notion among researchers in that the main bank relationship in Japan is extremely stable, this evidence suggests that the Japanese main bank is one of much more fluidity than has been generally believed