Professor of Japanese Business
University of California at San Diego, IR/PS
La Jolla, CA 92093-0519; Office: 858-534-2357
Title: "The Demise of the Main Bank as a Last Resort: Changes in Corporate Restructuring in Japan, 1981-2007"
Co-authors: Takeo Hoshi and Satoshi Koibuchi
We study the incidence and processes of corporate restructuring between 1981 and 2007 in Japan by building a unique database collected from newspaper articles on major episodes of corporate restructuring. By linking this database with financial data on public firms, we identify changes in the likelihood that a distressed firm undergoes restructuring, as well as in measures adopted during restructuring. We find that the ways in which distressed Japanese firms are restructured has changed during this period. Those firms that undergo restructuring continue to adopt more aggressive measures in terms of layoffs and cutbacks than other distressed firms, suggesting that "restructuring", when it happens, involves real adjustments. However, the likelihood that a large distressed firm with high levels of debt undergoes restructuring has declined. In recent years, the existence of a clearly d efined main bank is no longer a determinant for a troubled firm to undergo restructuring. When the main bank steps in, however, it is more likely to push for more drastic reductions in debt and bank loans than other entities leading a restructuring event.