TY - JOUR AU - Hoshi,Takeo AU - Kashyap,Anil AU - Scharfstein,David TI - Bank Monitoring and Investment: Evidence from the Changing Structure of Japanese Corporate Banking Relationships JF - National Bureau of Economic Research Working Paper Series VL - No. 3079 PY - 1989 Y2 - August 1989 DO - 10.3386/w3079 UR - http://www.nber.org/papers/w3079 L1 - http://www.nber.org/papers/w3079.pdf N1 - Author contact info: Takeo Hoshi Walter H. Shorenstein Asia-Pacific Research Center Stanford University Encina Hall - E301 Stanford, CA 94305-6055 Tel: 650-723-9744 E-Mail: tkohoshi@stanford.edu Anil Kashyap Booth School of Business University of Chicago 5807 S. Woodlawn Avenue Chicago, IL 60637 Tel: 773/702-7260 Fax: 773/702-0458 E-Mail: anil.kashyap@chicagobooth.edu David S. Scharfstein Harvard Business School Baker 239 Soldiers Field Boston, MA 02163 Tel: 617/496-5067 Fax: 617/496-8443 E-Mail: dscharfstein@hbs.edu M1 - published as Takeo Hoshi, Anil Kashyap, David Scharfstein. "Bank Monitoring and Investment: Evidence from the Changing Structure of Japanese Corporate Banking Relationships," in R. Glenn Hubbard, editor, "Asymmetric Information, Corporate Finance, and Investment" University of Chicago Press, 1990 (1990) M2 - featured in NBER digest on 1989-12-01 AB - During this decade the structure of corporate finance in Japan has changed dramatically. Japanese firms that once used bank debt as their prime source of financing now rely more heavily on the public capital markets. This trend was facilitated by the substantial deregulation of the Japanese capital markets. In an earlier paper (Moshi, Kashyap, and Scharfstein 1988). we demonstrated that investment by firms with close bank relationships appears to be less liquidity constrained than investment by firms without close bank ties. We interpreted this finding as evidence that bank ties tend to mitigate information problems in the capital market. This paper tracks the investment behavior of firms that have recently weakened their bank ties in favor of greater reliance on the bond market. The results suggest that these firms are now more liquidity constrained. The paper concludes with a discussion of why firms would loosen their bank ties in light of these liquidity costs. ER -