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

Masahiro Sekino
ISI Software Co., Ltd
Wako Watanabe
Research Fellow at Economic and Social Research Institute, Cabinet Office
Visiting Professor at Faculty of Business and Commerce, Keio University


Using the contract level data, we find that the lending by a Japanese state owned lending institution during the period of the credit crunch mitigated a firm’s loss of borrowing from its main bank. We further find that the state owned institution’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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  2. page1
  3. page2
    1. Introduction
  4. page6
    2. The Credit Crunch, Policy Measures and the Literature About State-Owned Banks
    1. page6
      2.1. The Credit Crunch
    2. page8
      2.2 The Japanese Credit Crunch of 1997-1998 and JASME’s Policy Responses
    3. page10
      2.4. The Relevant Literature about State Owned Banks
  5. page12
    3. Data and Methodology
    1. page12
      3.1. The Hypothesis and the Empirical Models
      1. page16
        Firm profitability
      2. page17
        Investment rate
      3. page18
        Cash to capital stock ratio
      4. page18
        Borrowing growth
      5. page18
        Employment growth
    2. page19
      3.2 Data
  6. page20
    4. Results
    1. page21
      4.1. Descriptive statistics
    2. page21
      4.2. The JASME Loans Regressions
    3. page25
      4.3. The Regression Results for Firm Performance, Real and Financial Behavior
      1. page25
        Firm profitability
      2. page26
        Investment rate
      3. page26
        Cash to capital stock ratio
      4. page27
        Borrowing growth
      5. page28
        Employment growth
      6. page28
        Medium-term effects of JASME loans on investment rate and employment growth
      7. page29
  7. page32
    5. Conclusion
  8. page33
  9. page36
  10. page41
    Figure 1. The Trends of Growths of Working Capital Loans and Equipment Loans by the JASME
  11. page42
    1. page42
      Table 1-1. Descriptive Statistics of the Variables Used in the Regressions for JASME Loans
    2. page43
      Table 1-2. Descriptive Statistics of the Variables Used in the Performance Measure Regressions
    3. page44
      Table 1-2. Descriptive Statistics of the Variables Used in the Performance Measure Regressions, Cotd.
    4. page45
      Table 2. The Regression Results for Equation (1): The Logarithm of Loans as a Dependent Variable
    5. page45
      Table 3. The Results of the Regressions of ROA in FY 2001
    6. page46
      Table 4. The Year by Year Results of the Regressions of ROA and the EBITDA to Total Assets Ratio
    7. page47
      Table 5. The Results of the Investment Rate Regressions
    8. page48
      Table 6. The Results of Cash, Borrowing Growth and Employment Growth Regressions
    9. page49
      Table 7. The Year by Year Results of the Regressions of the Investment Rate and the Employment Growth
    10. page50
      Table 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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