Abstracts

1. Using survey based data, we investigate factors influencing credit rationing within a

bank-based financial system. We show that rationing depends on various dimensions of

the firm-bank relationships and that the effects of relationship lending on rationing are

not identical for different firm size groups. Multiple-banking increases the probability of

rationing for small and large firms. Debt concentration with the main bank affects

positively smaller firms, while the opposite is true for large companies. The length of the

relationship with the main bank decreases the probability of rationing for both groups, but

more so for large firms endowed with more bargaining power. Finally, the firm-bank

spatial proximity, measured by the headquarters vicinity, does not affect the firms access

to credit.
2. Single-bank or multiple-bank relationship can play a role in the degree of corporate risk-

taking that inspires financing decisions. We study whether or not the magnitude of

corporate risk-taking is associated with bank relationship. We employ the public firms in

Taiwan with the sample period from 2001 to 2005 and select three variables centered on

earnings volatility and share price volatility as the proxies for corporate risk-taking. The

empirical evidence suggests that multiple-bank relationship can drive firms to take higher

risks under information asymmetry between banks and firms. The results remain

unchanged even after controlling for the main-bank effect. Finally, we observe that firms

with smaller size and higher growth opportunity tend to enhance the degree of corporate

risk-taking as they develop multiple-bank relationship.

3. We explore the determinants of the number of long-term bank relations of listed Japanese

firms using a unique data set covering the sample period of 19821999. Japanese listed

firms have about seven long-term bank loan relations on average, but show a large
 variation around the mean. We use data on loan and equity ownership to address the

impact of the Japan-specific bankfirm relations and bank control on the number of loans

decision. We find that having a relation with a top-equity holding bank increases the

number of bank relations and debt-rich and cash-poor firms have more bank relations.
4. We study a representative dataset from Turkey that identifies firmbank connections.

Banks in Turkey differ not only in size and nationality, but also in ownership and

orientation (non-Islamic versus Islamic)resulting in at least six distinct bank types. We

estimate a multinomial logit of the choice by the firm of bank type. We document a

strong correspondence between bank type and firm characteristics that is not always the

same as has been documented so far for US datasets. For example, small firms engage

large rather than small banks. Young, large, multiple-bank, and industry-diversified firms,

that are located in or close to Istanbul, team up with foreign banks. Islamic banks mainly

deal with young, multiple-bank, industry-focused and transparent firms.

5. We employ standard event study methodology to examine how bank consolidation

affected bankfirm relationships in Japan. We also investigate the source of relationship

benefits to client firms. Our analyses focus on the case of Mizuho Holdings, which

became the largest bank in the world upon the merger of three large Japanese banks on

August 19, 1999. Our findings indicate that firms using one of the three banks as their

main bank or for large credit exposures did not experience the significant negative stock

price reactions of nonmain bank or lower credit exposure firms. Multiple regression

analyses reveal that, holding constant a number of firm-level characteristics, main bank

status was the most important determinant of bankfirm relationships in Japan. Further

tests suggest a lesser though significant role for the size of loans from the main bank
6. This study investigates the effects of close ties between firms and banks as measured by

the share and length of the relationship with the main bank, and by the number of lenders
 on a firm's ability to develop innovation and introduce new products. As these effects

may vary depending on both the type of firm and innovation, this study provides results

for small and high-tech firms and distinguishes between process and product innovation.

The results suggest that for small firms banks do not intervene at the development stage

of an innovation but rather play their traditional role of financing investments for

constrained firms. In contrast, relationship banks do play an important role for high-tech

firms in the development of a process innovation and in the introduction of new products.

In addition, for both types of firms, the financing decision of the main bank seems to be

correlated with the lending behaviour of other banks, with multiple borrowing exerting a

positive effect on firm innovative capability

7. This paper tests the impact of an imperfect firmbank type match on firms financial

constraints using a dataset of about 4500 Italian manufacturing firms. Considering an

optimal match of opaque (transparent) borrowing firms with relational (transactional)

lending main banks, the possibility arises of firmbank odd couples where opaque

firms end up matched with transactional main banks. We show that the probability of

credit rationing increases when the mismatch between firms and banks widens. Our

conjecture is that odd couples emerge either because of organizational changes in the

credit market or since firms observe only imperfectly banks lending technology.
8. This paper investigates the effects of a bank relationship on reducing a firm's financial

asymmetric information in an investment function. A bank relationship is proxied by the

number of banks that a firm engages for its borrowing activities. A bank relationship is

further divided into two regimes, i.e., a strong and a weak bank relationship regime,

where the former is defined as one with smaller number of loan related-bank, and the

latter is one with a greater number. It is expected that a strong bank relationship reduces
 the asymmetric information, i.e., investment cash-flow sensitivity here. Based on the

examination of unique Taiwanese bank transaction data, our results show that investment

is less sensitive to cash flow when a firm has a strong bank relationship. This implies that

the firm holds less cash flow in hand for future investment expenditures. By contrast,

when a firm has a weak bank relationship, the investment is sensitive to cash-flow. Our

results are robust regardless if the bank relationship is proxied by either the loan amount

or loan duration.
9. This paper studies differences in family and non-family firms' access to bank lending

during the 20072009 financial crisis. The hypothesis is that the former's incentive

structure results in less agency conflict in the borrowerlender relationship. Using highly

detailed data on bankfirm relations, we exploit the reduction in bank lending in Italy

following the crisis in October 2008. We find statistically and economically significant

evidence that credit to family firms contracted less sharply than that to non-family firms.

The results are robust to observable ex-ante differences between the two types of firms

and to time-varying bank fixed effects. We show, further, that the difference is related to

an increased role for soft information in some Italian banks' operations, following the

Lehman Brothers failure. Finally, by identifying a match between those banks and family

firms, we can control for time-varying unobserved heterogeneity among the firms and

validate the hypothesis that our results are supply-driven

10. Close bankfirm relationships that characterize the financial systems in Germany and

Japan are often credited for reducing agency costs and increasing access to capital, thus

improving the performance of firms. Critics of these banking systems cite the alternative

possibility that conflicts of interests may also arise from both the banks multiple roles

with the firm, and the opportunity the banks have to use private information to shift risk
 or to otherwise participate in rent-seeking activities. We extend the empirical literature by

systematically investigating the impact of bank-influence on the financing choices and

performance of the firm. We find that bank-influenced firms in Germany do benefit from

increased access to capital. There is, however, no evidence to support the hypothesis of

either higher profitability or growth for bank-influenced firms. Results suggest that the

interest payments to debt ratio is significantly higher for bank-influenced firms, which

supports the hypothesis that German universal banks may engage in rent-seeking

activities and provides evidence of a conflicting interests between creditors and

shareholders.
11. This paper examines how the number of banking relationships affects the interaction

between managerial ownership and firm performance, and sheds light on the conditions

under which banking relationships play a role in alleviating shareholdermanager

conflicts. Our results provide several interesting insights. We document that bank

monitoring has substantial value when managers are improperly incentivized, but that it

becomes less important when managers are properly incentivized. There is a substitution

effect between the value-increasing benefits of managerial ownership and bank

monitoring. We also find that any existing free-riding concerns from having too many

banking relationships are problematical only when Tobin's Q is high and managerial

ownership is high.
12. Our paper seeks to examine the direct benefit of bank relationships for a distressed

borrower by assessing its influence on the success of firm private debt restructuring. We

find that a distressed firm with a stronger bank relationship has a greater probability to

successfully restructure its debt through private renegotiation. Accordingly, an analysis of

credit rating recovery provides complementary evidence on the factors of successful debt
 restructuring. A duration analysis of the length of time needed for a debt restructuring to

be completed is fully consistent with our documented results. We conclude that in a bank

dominated financial system like Taiwan's where firms are heavily bank-dependent, the

bankfirm relationship is of crucial importance to the success of financially distressed

firms in private debt restructuring.

13. We test hypotheses about the effects of bank size, foreign ownership, and distress on

lending to informationally opaque small firms using a rich new data set on Argentinean

banks, firms, and loans. We also test hypotheses about borrowing from a single bank

versus multiple banks. Our results suggest that large and foreign-owned institutions may

have difficulty extending relationship loans to opaque small firms. Bank distress appears

to have no greater effect on small borrowers than on large borrowers, although even small

firms may react to bank distress by borrowing from multiple banks, raising borrowing

costs and destroying some relationship benefits

14. We study the determinants of multiple bankfirm relationships using a uniquely rich data

set comprised of information on individual loans of a large number of firms in Colombia.

We control for firm-specific variables and find that the business cycle exerts important

influence on the number of bank relationships sustained by firms. Our evidence suggests

that the number of bank relationships is counter-cyclical, decreasing during

macroeconomic expansions and increasing during contractions. However, this effect is

stronger for large firms which have more access to alternative sources of funding.
15. This study investigates the impact of the bankfirm relationship on IPO underpricing in

China, an emerging economy with a bank-dominated financial system. Utilizing a hand-

collected loan data for 902 Chinese IPO firms from 2004 to 2011, we document that the

bankfirm relationship reduces the degree of IPO underpricing. Both the lender's and the

borrower's firm characteristics affect the signal quality of the bankfirm relationship,
 resulting in differential impacts on IPO underpricing. The relationship between firms and

banks with high credit quality or the relationship between politically unconnected firms

and banks has a more positive impact on mitigating IPO underpricing.

16. We explore the conflicts between the controlling founder of a firm and her family

members by studying how their ownership affects executive compensation differently.

Using a sample of family firms in China, we find that the ownership of a controlling

family owner is negatively correlated with the level of executive compensation and has a

positive effect on pay-for-performance sensitivity. However, the ownership of other

family members is positively associated with executive compensation and has a negative

effect on pay-for-performance sensitivity. We find that when the quality of corporate

governance is low and when other family members hold excess control rights in the firm,

the unfavorable effect of other family members is more striking.

17. This paper examines the effects of bank relationships on the likelihood and duration of

the decision to file for reorganization for a sample of Taiwanese firms in default. We find

that bank relationships significantly influence the likelihood and duration of a firm's

decision on filing for reorganization. Firms with strong bank relationships exhibit

significantly decreased likelihood of filing for reorganization and increased length of time

needed for making the decision. The findings suggest that in a bank-oriented financial

system where banks are the dominant providers of capital, bank relationships better

enhance informational advantages for banks and reduce coordination problems among

banks, which limits firm filings for costly reorganizations.

18. Under the current paradigm in small business lending research, large banks tend to

specialize in lending to relatively large, informationally transparent firms using hard

information, while small banks have advantages in lending to smaller, less transparent

firms using soft information. We go beyond this paradigm to analyze the comparative
 advantages of large and small banks in specific lending technologies. Our analysis begins

with the identification of fixed-asset lending technologies used to make small business

loans. Our results suggest that large banks do not have equal advantages in all of these

hard lending technologies and these advantages are not all increasing monotonically in

firm size, contrary to the predictions of the current paradigm. We also analyze lines of

credit without fixed-asset collateral to focus on relationship lending. We confirm that

small banks have a comparative advantage in relationship lending, but this appears to be

strongest for lending to the largest firms

19. This paper analyzes the optimality of multiple-bank lending, when firms and banks are

subject to moral hazard and monitoring is essential. Multiple-bank lending leads to higher

per-project monitoring whenever the benefit of greater diversification dominates the costs

of free-riding and duplication of effort. The model predicts a greater use of multiple-bank

lending when banks have lower equity, firms are less profitable and monitoring costs are

high. These results are consistent with some empirical observations concerning the use of

multiple-bank lending in small and medium business lending.

20. We test whether the length of a firmbank relationship affects firms foreign direct

investment (FDI) and/or exports and if this nexus depends on the main bank itself being

internationalized. The analysis is carried out on matched micro-data from a large survey

of Italian manufacturing enterprises from 1998 to 2003. Our main result is that a longer

relationship with the main bank fosters firms FDI but does not affect exports. Moreover,

when the main bank has subsidiaries abroad this result is strengthened for FDI and there

is even a weak positive effect of the duration of the firmbank relationship on exports
21. This paper simultaneously investigates the responses of stock prices of the related banks

and the client firms when one of them is in distress. Two effects are examined. The

distressed bank effect, which claims that the stock price of client firms are coupled to that
 of their related distress banks, and the distressed firm effect, which claims that the related

banks are negatively affected when their client firms are in distress. We collect the

detailed information of individual transaction loan data to find the relationship between

banks and their client firms. Asymmetric responses are reported in this paper. Our results

reject the distressed bank effect but, by contrast, cannot reject the distressed firm effect.

We propose the fund diversification hypothesis and the leverage hypothesis, and argue the

decoupling effect of the distressed bank and their listed firms, owing to the diversified

choice of clients' financing channel.

22. We formulate and test hypotheses about the role of bank ownership typeforeign, state-

owned, and private domestic banksin banking relationships. Our application uses data

from India, an important developing nation. The empirical results are consistent with all

of our hypotheses with regard to foreign banks. First, these banks tend to establish

relationships with relatively transparent firms. Second, firms that have relationships with

foreign banks are more likely to enter into multiple banking relationships and to maintain

a larger number of such relationships. Finally, firms banking with foreign banks are more

likely than others to diversify relationships across bank ownership types. The data are

also consistent with the hypotheses that firms with relationships with state-owned banks

are relatively unlikely to maintain multiple banking relationships, tend to interact with a

smaller number of banks, and less often diversify across ownership types.
23. This paper investigates whether the benefits of bankborrower relationships differ

depending on three factors identified in the theoretical literature: verifiability of

information, bank size and complexity, and bank competition. We extend the current

literature by analyzing how relationship lending affects loan contract terms and credit

availability in an empirical model that simultaneously accounts for all three of these
 factors. Based on Japanese survey data we find evidence that the benefits from stronger

bankborrower relationships in terms of credit availability are limited to smaller banks.

However, when the benefits are measured as improved credit terms, we find little

additional benefit, and in some cases increased cost, from stronger relationships for

opaque borrowers and for borrowers who get funding from small banks. These latter

findings suggest the possibility that relationship borrowers may suffer from capture

effects
24. We formulate and test hypotheses about the role of bank type small versus large, single-

market versus multimarket, and local versus nonlocal banks in banking relationships.

The conventional paradigm suggests that community banks small, single-market,

local institutions are better able to form strong relationships with informationally

opaque small businesses, while megabanks large, multimarket, nonlocal institutions

tend to serve more transparent firms. Using the 2003 Survey of Small Business Finance

(SSBF), we conduct two sets of tests. First, we test for the type of bank serving as the

main relationship bank for small businesses with different firm and owner

characteristics. Second, we test for the strength of these main relationships by examining

the probability of an exclusive relationship and main bank relationship length as

functions of main bank type and financial fragility, as well as firm and owner

characteristics. The results are often not consistent with the conventional paradigm,

perhaps because of changes in lending technologies and deregulation of the banking

industry.

25. The role of companies and firms has been understood in terms of a commercial

business paradigm of perspective that aims on economic profitability and success.

However, in the past few years, as a consequence of rising globalisation and critical
 ecological issues, the perception of the role of companies in the broader societal

context in which it operates, has been altered, by redefining the responsibilities of

firms towards society and environment along with financial goals.

26. The study proposed to analyse the impact of Firm characteristics toward Corporate

Social Responsibility expenditure. The variables used in this research are size of

firm, firm profitability, firm leverage, and sales of the firm. The populations are all

firm BSE 30 index in 2007-2012 periods. The analysis methods are using multiple

regression analysis. The research found that firm size, firm profitability, firm sales,

have an influence toward the Corporate Social Responsibility expenditure, while

firm leverage have no influence toward the Corporate Social Responsibility

expenditure. In this paper we study the relevance of the gender of the contracting

parties involved in lending. We show that female entrepreneurs face tighter credit

availability, even though they do not pay higher interest rates. The effect is

independent of the information available about the borrower and holds if we

control for unobservable individual effects. The gender of the loan officer is also

important: we find that female officers are more risk-averse or less self-confident

than male officers as they tend to restrict credit availability to new, un-established

borrowers more than their male counterparts

27. We provide evidence on the link between busyness of CEOs and/or chairmen and

the performance of family firms in India. We show that the level of CEO busyness

has a negative effect on firm performance, measured by Tobin's q. That is, the

frequency of the CEO attending board meetings is positively associated with

 Tobin's q. We also find that the effect of CEO busyness on firm performance is not

different between family firms with a family-member CEO/chairman and family

firms with a non-family-member CEO/chairman. Our findings show that the effect

of CEO busyness on Tobin's q is negative for small firms, and that the effect of

chairman busyness on Tobin's q is negative for large firms. While the

CEO/chairman busyness is not associated with Tobin's q in the low Tobin's q

sample, it has a negative effect on Tobin's q in the high Tobin's q sample, implying

that firms with better growth opportunities should be managed by less busy CEOs.

28. The extant literature generally suggests that the performance of client firms

deteriorates if their distressed main bank reduces the supply of credit. However,

this insight is only consistent with the notion that main banks have an information

advantage over other banks to the extent that a client firm has trouble getting

access to credit if the firm changes its main bank. This paper shows that Japanese

firms did change their main banking relationship when their main banks become

distressed in a period with financial shocks. Surprisingly, these firms did not suffer

from loss of access to credit and actually their performance significantly improved

after their change of main banks.

29. This paper investigates a firm's choice between borrowing from a single bank and

from two banks. The focus is on how this decision affects banks' equilibrium

monitoring intensities and loan rates. Two-bank lending suffers from duplication of

effort and sharing of monitoring benefits, but it benefits from diseconomies of

scale in monitoring. Thus, two-bank lending involves lower monitoring but not
 necessarily higher loan rates than single-bank lending. The optimal borrowing

structure balances the benefit of monitoring for the firm in terms of higher success

probability of the project against its drawbacks of lower expected private return

and higher total monitoring costs. In contrast to the previous theoretical literature,

the model lays down an explanation for the empirical observation that multiple-

bank lending does not unambiguously increase loan rates or firms' quality, in

particular in small business lending.

30. This paper investigates venture capitalists' monitoring of managerial behavior by

examining their impact on CEO payperformance sensitivity across various

controlling structures in Chinese firms. We find that the effectiveness of venture

capitalists' monitoring depends on different types of agency conflict. In particular,

we find that venture capital (VC) monitoring is hampered in firms that experience

severe controlling-minority agency problems caused by disproportionate ownership

structures. We provide further evidence that VC is more likely to exert close

monitoring in firms that have greater managerial agency conflict, and thus require

more direct monitoring. However, controlling-minority agency problems have a

greater impact on VC monitoring than managerial agency problems. Overall, our

study suggests that venture capitalists' monitoring role is hampered in an emerging

market where firms have complex ownership structures that contribute to severe

agency conflict between controlling and minority shareholders.