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Discussed by Shing-yang Hu National Taiwan University

Analyzing Japanese data to explore how information precision and bank relationships influence firms' choice of financing - public or private, equity, bond, or convertible. Considering factors such as analyst forecast errors, bank relationships, and market timing variables.

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Discussed by Shing-yang Hu National Taiwan University

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  1. The Effect of Information Production and Bank Relationships on Financing ChoiceMasaya IshikawaHidetomo Takahashi Discussed by Shing-yang Hu National Taiwan University

  2. Summary • Use Japanese data to examine the effect of information environment on financing choice • Public or private • Bond, convertible, or equity

  3. Comments - Hypothesis • Hypothesis 2: Information precision  Not to issue equity • Reason provided is Issuing equity  information production

  4. Comments – Nested model • Sequence of nested models • H1 is conditional on the type of securities (equity) • H3 and H4 are conditional on the type of securities (bond) • H2 is conditional on the type of market • Consider to talk H3, H4, and H1 first, then H2 • Tables 4 and 5 results are related

  5. Comments – Japanese data • Previous studies that use Japanese data to examine this issue • Mention of Japanese data only in page 10

  6. Comments –Variables definition • Information producing activities • Variables used • Forecast errors by analysts or managers • Bank relationship • Variables can be considered • Firm size • Number of analysts

  7. Comments –Variables definition • Matching the data definition with the hypothesis • Hypothesis 1 • The likelihood of issuing public securities vs. private securities increases with the precision of the analysts’ and/or firms’ earnings forecast, especially conditioned on stock issuing • Data • Decilized Analysts Forecasts: Inverse of the precision of forecast

  8. Comments –Variables definition • Forecast • From analysts or managers • Is it the most recent forecast that is used? • How close is it from the earnings reporting date?

  9. Comments –Variables definition • Bank relationship • LOAN1: Dummy variable which equals 1 if the main bank has served as a top lender for the recent 10 years • LOAN2: the logarithm of the total debt minus the total bank loans divided by the total debt • Consider other aspect: percentage of bank loan obtained from main bank

  10. Comments –Variables definition • Market timing variables • Level • Tobin’s Q • Innovation • 250-day stock return • Return of the government bond • Spread in returns between corporate and government bond • Other variables to consider • Yield on government bond • Yield spread between corporate and government bond

  11. Comments –Variables definition • Year dummies to control for other time effects

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