Article ID Journal Published Year Pages File Type
5086495 Japan and the World Economy 2006 23 Pages PDF
Abstract
This paper investigates whether banks exercise forbearance lending to troubled firms by presenting a stylized model and then testing the hypotheses implied by this model, using firm-level data of Taiwan. During 1991-1996 when the economy started to show signs of weakening, banks are found to have exercised forbearance lending across all types of firms, hoping that the economy would soon recover to salvage those ailing firms. During 1997-2001 when the recession went even deeper, banks were found no longer to forbear loans. This period saw a more rapid decline in property prices, which coincided with a wave of asset liquidation during this period.
Keywords
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Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
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