TY  - JOUR
AU  - Hoshi,Takeo
AU  - Kashyap,Anil
AU  - Scharfstein,David
TI  - The Role of Banks in Reducing the Costs of Financial Distress in Japan
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 3435
PY  - 1990
Y2  - September 1990
UR  - http://www.nber.org/papers/w3435
L1  - http://www.nber.org/papers/w3435.pdf
N1  - Author contact info:
Takeo Hoshi
School of International Relations and Pacific Stud
University of California, San Diego
9500 Gilman Drive
La Jolla, CA  92093-0519
Tel: 858/534-5018
Fax: 858/534-3939
E-Mail: thoshi@ucsd.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
M2  - featured in NBER digest on 1990-12-10
AB  - This paper explores the idea that financial distress is costly because free-rider problems and information asymmetries make it difficult for firms to renegotiate with their creditors in times of distress. We present evidence consistent with this view by showing Japanese firms with financial structures in which free-rider and information problems are likely to be small perform better than other firms in industrial groups-those with close financial relationships to their banks, suppliers, and customers-invest more and sell more after the onset of distress than non-qroup firms. Moreover, firms that are not group members, but nevertheless have strong ties to a main bank also invest and sell more than firms without strong bank ties.
ER  -