Inside bank premiums as liquidity insurance

Tadanobu Nemoto, Yoshiaki Ogura, Wako Watanabe

Research output: Contribution to journalArticle

Abstract

This paper estimates inside bank premiums arising from relationship banking and identifies the primary mechanism causing them among competing extant theories. Our empirical results using a dataset that is primarily based on a survey that we designed show that inside bank premiums are economically significant with an average of 68–71 basis points for short-term loans. The subsample regressions show that these premiums are more likely to result from the provision of implicit insurance or flexibility in renegotiation by the inside bank and that they are more significant for firms whose inside banks are larger, those with a lower capital to asset ratio, or those in more concentrated loan markets.

Original languageEnglish
Pages (from-to)61-76
Number of pages16
JournalJournal of the Japanese and International Economies
Volume42
DOIs
Publication statusPublished - 2016 Dec 1

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liquidity
premium
insurance
bank
loan
banking
assets
flexibility
firm
regression
Liquidity
Premium
Insurance
market
Loans

Keywords

  • Information rent
  • Liquidity insurance
  • Relationship banking

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics
  • Political Science and International Relations

Cite this

Inside bank premiums as liquidity insurance. / Nemoto, Tadanobu; Ogura, Yoshiaki; Watanabe, Wako.

In: Journal of the Japanese and International Economies, Vol. 42, 01.12.2016, p. 61-76.

Research output: Contribution to journalArticle

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