Main Banks and the Governance of Financial Distress

Abstract

This chapter examines the role of main banks in the governance of firms in financial distress, based on evidence from the high growth period in the 1960s. The main bank system efficiently handles the problems of firms in distress. When they intervene, they do so quickly and effectively; their intervention is targeted, selective, and appropriate. Protracted disruptive creditor disputes are rare, since main bank support maintains the intangible asset base of the firm.

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