We propose a U-shaped relation between the relative weight of bank loans in total corporate debt and the firm's market-to-book ratio-a proxy for expected growth-which reconciles most existing theories. Using data on Japanese firms for 1983-97, we do find that, in the lower range of growth...

Previous research shows that bank information production mitigates asymmetric information problems. However, this literature has ignored the concern that firms with better growth prospects are more vulnerable to bank rent extraction. This paper points out that funding competition from new equity...

This paper shows how main bank rent extraction affects corporate decisions about investment and financing during financial regulatory reform. Our model predicts that limited loanable funds can initially contain main bank controlled over-investment, even when new equity is available to the firm....