ESRI Discussion Paper Series No.342 Does the Policy Lending of the Government Financial Institution Mitigate the Credit Crunch? Evidence from the Loan Level Data in Japan
Abstract
Using the contract level data, we find that the lending by Japan Finance Corporation for Small and Medium Enterprise (JASME), a state owned lending institution, mitigated a firm’s loss of borrowing from its main bank during the credit crunch. We further find that the JASME’s lending instrumented by the main bank’s lending supply growth as explained by the bank’s capital adequacy, which captures the lending to mitigate the loss of borrowing, had negative effects on the investment rate and that the JASME’s lending had an weak effect to mitigate the cash sensitivity of cash that captures the firm’s financial constraint.
- Keywords: government financial institution, credit crunch, loan contracts
- JEL classification: G01, G21, G28
Structure of the whole text(PDF-Format 1 File)
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page1Abstract
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page21. Introduction
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page62. The Credit Crunch, Policy Measures and the Literature About State-Owned Banks
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page62.1. The Credit Crunch
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page82.2 The Japanese Credit Crunch of 1997-1998 and JASME’s Policy Responses
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page102.4. The Relevant Literature about State Owned Banks
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page113. Data and Methodology
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page113.1. The Hypothesis and the Empirical Models
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page15Firm profitability
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page16Investment rate
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page17Cash to capital stock ratio
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page17Borrowing growth
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page18Employment growth
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page183.2 Data
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page204. Results
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page204.1. Descriptive statistics
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page204.2. The JASME Loans Regressions
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page244.3. The Regression Results for Firm Performance, Real and Financial Behavior
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page24Firm profitability
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page25Investment rate
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page25Cash to capital stock ratio
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page26Borrowing growth
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page27Employment growth
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page27Medium-term effects of JASME loans on investment rate and employment growth
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page27Discussion
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page305. Conclusion
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page32Appendix
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page35References
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page40Figure 1. The Trends of Growths of Working Capital Loans and Equipment Loans by the JASME
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page41Tables
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page41Table 1-1. Descriptive Statistics of the Variables Used in the Regressions for JASME Loans
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page42Table 1-2. Descriptive Statistics of the Variables Used in the Performance Measure Regressions
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page43Table 1-2. Descriptive Statistics of the Variables Used in the Performance Measure Regressions, Cotd.
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page44Table 2. The Regression Results for Equation (1): The Logarithm of Loans as a Dependent Variable
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page44Table 3. The Results of the Regressions of ROA in FY 2001
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page45Table 4. The Year by Year Results of the Regressions of ROA and the EBITDA to Total Assets Ratio
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page46Table 5. The Results of the Investment Rate Regressions
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page47Table 6. The Results of Cash, Borrowing Growth and Employment Growth Regressions
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page49Table 7. The Year by Year Results of the Regressions of the Investment Rate and the Employment Growth
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page50Table 8. The Year by Year Results of the Regressions of ROE and the Investment Rate without Ex-Ante ROA and Leverage as Instrumental Variables
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