@article{598bee0dc84942889d5d7ed33b2cd4c6,
title = "Inside bank premiums as liquidity insurance",
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.",
keywords = "Information rent, Liquidity insurance, Relationship banking",
author = "Tadanobu Nemoto and Yoshiaki Ogura and Wako Watanabe",
note = "Funding Information: This paper is a result of the research of the Study Group on Efficient Corporate Finance and Inter-Firm Network at the Research Institute of Economy, Trade, and Industry (RIETI) in Tokyo, Japan. The previous version of this paper is circulated as RIETI Discussion Paper 11E067, with the title “An Estimation of the Inside Bank.” We are grateful for the insightful comments made by anonymous referees, Hans Degryse, Masaharu Hanasaki, Takashi Hatakeda, Clair Matthews, Daisuke Miyakawa, Arito Ono, Xu Peng, Bogdan Stacescu, Hirofumi Uchida, Konari Uchida and other participants of the 3rd Conference on Regional Finance at Osaka University, seminars at Bank of Japan, Hitotsubashi University, Hosei University, RIETI, Research Institute of Capital Formation (Development Bank of Japan), Waseda University, a session at the 18th Nippon Finance Association Annual Meeting, the 2010 Financial Intermediation Research Society Finance Conference, and the 2010 Financial Management Association Annual Meeting. We also thankfully acknowledge the financial support by KAKENHI 21730268, 21330076, and 60294295. Publisher Copyright: {\textcopyright} 2016 Elsevier Inc. Copyright: Copyright 2016 Elsevier B.V., All rights reserved.",
year = "2016",
month = dec,
day = "1",
doi = "10.1016/j.jjie.2016.10.004",
language = "English",
volume = "42",
pages = "61--76",
journal = "Journal of the Japanese and International Economies",
issn = "0889-1583",
publisher = "Academic Press Inc.",
}