KEIRETSUS, INFLUENTIAL BANKS, AND FINANCIAL DISTRESS: EVIDENCE FROM JAPAN AND AUSTRIA

In this study we examine the likeliness of financial distress in Austria and Japan. It is argued that both countries are highly comparable in respect to their bank oriented financial systems and that the keiretsu governance system in Japan lowers the probability of financial distress for member firms. We compare the relative probabilities of observed financial distress between Japan and Austria. Our evidence suggests that the probability of financial distress is lower in Japanese keiretsu firms relative to Austrian firms. Consistent with our hypothesis, we find that non-keiretsu Japanese firms and Austrian firms have similar probabilities of financial distress.