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Evolution of Japanese Main Bank System and its Effects on Bank Rent Extraction

This paper aims to understand the evolution of the Japanese main bank system and its impact on bank rent extraction through variations in corporate financing decisions. It also examines the reaction of the financial system to different reforms.

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Evolution of Japanese Main Bank System and its Effects on Bank Rent Extraction

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  1. Understanding the Rise and Decline of the Japanese Main Bank System: The Changing Effects on Bank Rent Extraction By: X. WU (City University of Hong Kong) and J. Yao (The Hong Kong Polytechnic University) Discussant: H. EL HAJJ CHEHADE GERME – ESA (Universityof Lille 2, France)

  2. Purpose • To understand and explain the evolution of the Japanese main bank system, through the variation of the corporate financing decisions which affects the main bank rent extraction. • To understand the reaction of the financial system to different reforms 2006 NTU International conference on finance

  3. Interesting paper • The research question is clearly defined • The problem is well placed in the literature • Interesting presentation of the Japanese Main Bank System • The model is clear and easy to understand 2006 NTU International conference on finance

  4. Some remarks and suggestions • Transaction costs • There are no transaction costs in the model for simplicity • BUT, it may be interesting to consider the transaction costs related to each source of financing because they affect considerably the payoffs • Transaction costs are part of the trade-off in models on the choice of financing source (for example models on multiple lending) 2006 NTU International conference on finance

  5. The model seems to be very specific to the Japanese system: • What about the generalization of the model? • Could it be adapted to other economies? • The only way to diversify financing sources in the model is equity financing: • There are other arm’s length financing such as transactional bank lending (multiple bank lending) or market debt, that may be considered like alternative scenarios in the model • This may not be adapted to the Japanese system but it could be a way to generalize the model. 2006 NTU International conference on finance

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