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

    Fingerprint

    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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