Bank dependence and corporate propensity to save

•This paper investigates how bank dependence affects corporate cash saving policies.•We use a sample of Japanese firms over the period 2002–11.•We find that bank-dependent firms have larger cash balances and cash flow sensitivity of cash.•Firms' size and R&D intensity determine cash saving policies only for firms with access to the bond markets.•Access to the bond markets is important for efficient cash saving policies.

Recently, Japanese firms resumed accumulation of cash to the highest cash-holding levels among developed economies. We investigate the cash-saving behavior of these firms over the period 2002–2011, focusing on the firm–bank relationship. We find that the determinants of cash-saving policy are substantially different between bank-dependent firms and firms with access to the bond markets. We document that firm size and research and development intensity significantly determine the cash balances and cash-flow sensitivities of cash for firms that have access to the bond markets; however, this is not the case for bank-dependent firms. Furthermore, the effects of these variables become larger after the 2008 financial crisis only for firms with access to the bond markets. These results suggest that bank-dependent firms do not determine their cash-saving policies based on precautionary demands for cash.