1. Discussed by Shing-yang Hu National Taiwan University
The Effect of Information Production and Bank Relationships on Financing Choice Masaya Ishikawa Hidetomo Takahashi
Discussed by
Shing-yang Hu
National Taiwan University

2. Summary
Use Japanese data to examine the effect of information environment on financing choice
Public or private
Bond, convertible, or equity

3. Comments - Hypothesis Hypothesis 2:
Information precision  Not to issue equity
Reason provided is
Issuing equity  information production

4. Comments – Nested model
Sequence of nested models
H1 is conditional on the type of securities (equity)
H3 and H4 are conditional on the type of securities (bond)
H2 is conditional on the type of market
Consider to talk H3, H4, and H1 first, then H2
Tables 4 and 5 results are related

5. Comments – Japanese data
Previous studies that use Japanese data to examine this issue
Mention of Japanese data only in page 10

6. Comments – Variables definition
Information producing activities
Variables used
Forecast errors by analysts or managers
Bank relationship
Variables can be considered
Firm size
Number of analysts

7. Comments – Variables definition
Matching the data definition with the hypothesis
Hypothesis 1
The likelihood of issuing public securities vs. private securities increases with the precision of the analysts’ and/or firms’ earnings forecast, especially conditioned on stock issuing
Data
Decilized Analysts Forecasts: Inverse of the precision of forecast

8. Comments – Variables definition
Forecast
From analysts or managers
Is it the most recent forecast that is used?
How close is it from the earnings reporting date?

9. Comments – Variables definition
Bank relationship
LOAN1: Dummy variable which equals 1 if the main bank has served as a top lender for the recent 10 years
LOAN2: the logarithm of the total debt minus the total bank loans divided by the total debt
Consider other aspect: percentage of bank loan obtained from main bank

10. Comments – Variables definition
Market timing variables
Level
Tobin’s Q
Innovation
250-day stock return
Return of the government bond
Spread in returns between corporate and government bond
Other variables to consider
Yield on government bond
Yield spread between corporate and government bond

11. Comments – Variables definition
Year dummies to control for other time effects