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

    Keywords

    • Information rent
    • Liquidity insurance
    • Relationship banking

    ASJC Scopus subject areas

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

    Fingerprint Dive into the research topics of 'Inside bank premiums as liquidity insurance'. Together they form a unique fingerprint.

  • Cite this