The Japanese Main Bank System: Its Relevance for Developing and Transforming Economies

By Masahiko Aoki; Hugh Patrick | Go to book overview

lending will be a dominated form of financing. Of course, a firm's reputation is likely to be the central determinant of whether it can rely on public bond and equity markets to secure funding. Therefore, if an economy includes a significant number of firms that can circumvent bank dependence, then the financial system is likely to evolve to de-emphasize the role of banks. Indeed, one way to view the US economy is that by relying on public markets and exploiting firms' reputations, the United States is able to run a financial system that is much less dependent on bank financing than many other capitalist economies. An implication of this arrangement is that banks no longer seem the natural party to be involved with corporate governance. From this perspective, it is not surprising that the US system of corporate governance has been different from that of Japan in the 1950s and 60s.

An interesting recent development in Japanese corporate financing is that many large Japanese companies have begun to shift away from bank financing in favour of bond and equity financing. As Hoshi, Kashyap and Scharfstein (1993) discuss, this shift appears to be driven both by deregulation which has made the use of these instruments legal, and by the continued success and improved visibility of the companies that have made the securities attractive to investors. Ironically, although the major Japanese corporations may previously have been very well served by the type of main bank system that we have described, they may have outgrown it. In thinking about Poland, we think it also prudent to recognize that this type of evolution is possible, but it remains a long way down the road of economic reform.


References

Ajinomoto. 1971. Ajinomoto Kabushiki Kaisha Sha-shi (Ajinomoto's Company History), vol. 1. Tokyo: Ajinomoto.

——. 1989. Aji o Tagayasu: Ajinomoto Hachijunen-shi (Cultivating Tastes: Eighty Years' History of Ajinomoto). Tokyo: Ajinomoto.

Bank of Japan, Research Bureau. 1973. Nihon Kin'yu-shi Shiryo: Showa Hen, vol. 34 (Data for Japanese Financial History: Showa Volumes).

——. 1980. Nihon Kin'yu-shi Shiryo: Showa Zokuhen, vol. 8 (Data for Japanese Financial History: More Showa Volumes). Tokyo.

Berg, Andrew and Olivier Blanchard. 1992. 'Stabilization and Transition: Poland 1990-1991.' Paper presented at NBER 'Conference on Transition in Eastern Europe,' Cambridge MA.

Corbett, Jenny and Colin Mayer. 1991. 'Financial Reform in Eastern Europe: Progress with the Wrong Model.' CEPR Discussion Paper 603, London.

Edo, Hideo. 1986. Watashi no Mitsui Showa-shi (My Showa History of Mitsui). Tokyo: Toyo Keizai Shimposha.

Gerlach, Michael. 1992. Alliance Capitalism: The Social Organization of Japanese Business. Berkeley: University of California Press.

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