Ownership Structure and Firm Profitability in the Japanese Keiretsu

Download or read book Ownership Structure and Firm Profitability in the Japanese Keiretsu written by Dave Bernotas and published by . This book was released on 1999 with total page 66 pages. Available in PDF, EPUB and Kindle. Book excerpt: Financial institutions within Japan's corporate groups, called keiretsu, are both primary lenders and shareholders of member firms. Current literature has failed to produce unanimity about how ownership integration between firms and banks affects firm profitability. Competing theories propose that a bank can use its position as shareholder to either promote firm profitability or to induce high levels of firm borrowing to generate interest revenue. This paper uses panel data to show that bank ownership leads to profit non-maximization due to induced overborrowing. It will also be shown that this effect has been diminished over time due to finanicial market deregulation.