The Main Bank Relationship in Japan :: GCSE Business Marketing Coursework

The Main Bank Relationship in Japan First, it is inevitable to define what a Japanese primary(prenominal) believe is. The principal(prenominal) edge is defined as the financial group (kinyu keiretsu in japanese) in the paper. pecuniary group is defined in principle by the amount of pay that a bank supplies to a particular borrowing guild. When a minded(p) company has taken out the largest amount of loans from a particular bank for the past three or more years consecutively, the company is viewed as belonging to that banks financial group. Nearly all the companies listed in the first section of Tokyo Stock Exchange have a main bank. However, these companies borrow not just from their main bank, but from a large number of other banks and financial institution as well. piece of music the main bank is an important lender, the company must also commit on loans from the main banks competitors which in sum farthermost exceed those from the main bank itself.Although the g enerally accepted notion among researchers in that the main bank relationship in Japan is extremely stable, this distinguish suggests that the Japanese main bank is peerless of much more fluidity than has been generally believed. Now, the paper presents some factors that might account for the actual changing patterns of main bank affiliations. These factors are (a) the uncertainty of companies operating performance, assuming the main bank relationship serves an important function of risk-sharing between companies and banks, it can be derived that an increase in the uncertainty of the business environment for a particular industry should decrease the proportion of companies that change their main bank, thus, changes in main bank affiliation will be systematically related to changes in the uncertainty of the performance of corporate borrowers (b) the history of the main bank relationship, as the accumulated value of the main bank relationship is assumed to be positively correlated with the duration of the relationship, the longer a company has act to maintain a main bank relationship with a detail bank, ceteris paribus, the less likely the company is to break that relationship off this trace concerning the changeableness of the main bank relationship is also a testable one (c) the growth of the borrowing companies, it can be regarded as related to main bank changes in 2 ways first, the growth of a company raise its