1. Understanding the Rise and Decline of the Japanese Main Bank System: The Changing Effects on Bank Rent Extraction
By: X. WU (City University of Hong Kong)
and J. Yao (The Hong Kong Polytechnic University)
Discussant: H. EL HAJJ CHEHADE
GERME – ESA (University of Lille 2, France)

2. 2006 NTU International conference on finance
Purpose
To understand and explain the evolution of the Japanese main bank system, through the variation of the corporate financing decisions which affects the main bank rent extraction.
To understand the reaction of the financial system to different reforms
2006 NTU International conference on finance

3. 2006 NTU International conference on finance
Interesting paper
The research question is clearly defined
The problem is well placed in the literature
Interesting presentation of the Japanese Main Bank System
The model is clear and easy to understand
2006 NTU International conference on finance

4. Some remarks and suggestions
Transaction costs
There are no transaction costs in the model for simplicity
BUT, it may be interesting to consider the transaction costs related to each source of financing because they affect considerably the payoffs
Transaction costs are part of the trade-off in models on the choice of financing source (for example models on multiple lending)
2006 NTU International conference on finance

5. 2006 NTU International conference on finance
The model seems to be very specific to the Japanese system:
What about the generalization of the model?
Could it be adapted to other economies?
The only way to diversify financing sources in the model is equity financing:
There are other arm’s length financing such as transactional bank lending (multiple bank lending) or market debt, that may be considered like alternative scenarios in the model
This may not be adapted to the Japanese system but it could be a way to generalize the model.
2006 NTU International conference on finance