Publishing type：Research paper (bulletin of university, research institution)   Kind of work：Single Work  

This paper shows that whether information quality makes soft budget constraint problems more or less likely to arise depends on the size of collateral offered by borrowers (i.e. entrepreneurs). If the collateral is sufficiently large, sufficiently accurate information is more likely to induce the lender to refinance a project, which softens the budget constraint of entrepreneurs and brings about efficiency loss, that is, causes soft budget constraint problems. This paper suggests that Japanese firms with close main bank relationships are likely to suffer from soft budget constraint problems, which may be one reason why they have lower profits than firms without close main bank relationships.

Repository URL： https://doi.org/10.24544/ocu.20220412-004

Publishing type：Research paper (bulletin of university, research institution)   Kind of work：Single Work  

This paper has shown that soft budget constraints are more likely to arise when a firm’s bargaining power is larger and when the liquidation value of its project is smaller. An increase in the firm’s bargaining power and a decrease in the liquidation value of its project augment the debt forgiveness to the firm, which reduces the firm’s incentive to exert effort to circumvent financial distress, thereby bringing about soft budget constraints. This paper suggests that the bubble burst may be a contributing factor to soft budget constraints in Japan and that an injection of public capital into banks that suffered from large nonperforming loans can help to harden the budget constraints of borrowing firms.

Publishing type：Research paper (scientific journal)   Kind of work：Single Work  

This paper presents a model of soft budget constraints on firms where refinancing of poor projects is ex post inefficient when viewed in isolation, and analyzes how bank capital regulation affects the softness of firms’ budget constraints. A firm is said to have a soft budget constraint if a bank allows the firm to continue to operate even when continuation is ex post inefficient. It is shown that bank capital regulation may induce soft budget constraints on firms because banks have an incentive to roll over loans made to poor firms in order to comply with the regulation. It is also shown that soft budget constraints are more likely to arise when the regulation is less strict, that is, when banks’ minimum required capital ratio is lower. This paper also demonstrates that soft budget constraints may be more likely to arise under Basel III, that bank capital regulation may increase the probability of bank failures by inducing the soft budget constraint problem, and that the bank capital regulation of Basel I was one of the causes of soft budget constraints in the post-bubble period of Japan.

DOI： 10.1007/s11294-014-9504-x

Publishing type：Research paper (scientific journal)   Kind of work：Single Work  

ソフトな予算制約問題と過剰債務問題が同時に生じうる状況における融資の最適集中度を求めた。また、資産を多く持つ企業あるいは、格付けの高い企業ほど低い集中度をもつことを示した。

Audience： High school students

Audience： High school students