Banking relationship numbers and new business bankruptcies

Banking relationship numbers and new business bankruptcies This paper examines the effect of the number of correspondent financial institutions for small and medium-sized enterprises (SMEs) at the first settlement of accounts on subsequent firm bankruptcy risk using survival models. We use a unique firm-level data set of 2667 unlisted SMEs incorporated in Japan between April 2003 and December 2009. Moreover, in the nature of the analysis, we focus on firms that transact with at least one financial institution and disclose information about profit at the first settlement. We find that more correspondent financial institutions for SMEs at the first settlement increase subsequent firm bankruptcy risk. Furthermore, we check the robustness of this result with the method of instrumental variables (IV methods) and obtain similar results; in other words, the risk of firm bankruptcy increases with the number of correspondent financial institutions. Small Business Economics Springer Journals

Banking relationship numbers and new business bankruptcies

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Springer US
Copyright © 2015 by The Author(s)
Business and Management; Management; Microeconomics; Entrepreneurship; Industrial Organization
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