Abstract
This paper examines how the main bank’s performance can affect firm profitability. We selected the main bank of each firm as the largest bank lenders to each firm. Most of prior empirical or theoretical researches on the main bank relationships insists that stronger main bank relationship don’t improve the firm profitability. We investigates this empirical analysis using a data set containing virtually all Korean publicly listed firms for the period 2002-2006.
We find the negative effects of main bank performance on the firm profitability. The close firm and main bank relationships in the Korean listed firms may not improve firm profitability. The Hold up costs may be present in the main bank relationships. The exclusive bank firm ties in the main bank relationships may could adversely shape management decisions and firm profitability. And the recent avoidances of corporate loans by the Korean banks may increase this negative effect of the main bank performance on the firm profitability.
We find the negative effects of main bank performance on the firm profitability. The close firm and main bank relationships in the Korean listed firms may not improve firm profitability. The Hold up costs may be present in the main bank relationships. The exclusive bank firm ties in the main bank relationships may could adversely shape management decisions and firm profitability. And the recent avoidances of corporate loans by the Korean banks may increase this negative effect of the main bank performance on the firm profitability.
| Translated title of the contribution | Bank Performance and Firm Profitability |
|---|---|
| Original language | Korean |
| Pages (from-to) | 171-187 |
| Number of pages | 17 |
| Journal | 경영교육연구 |
| Volume | 27 |
| Issue number | 3 |
| State | Published - Jun 2012 |