Working Papers

The Financial System




Listing and Financial Constraints

Author:Kenichi Ueda, Akira Ishide, Yasuo Goto

Release Date



We confirm, with a twist, that listing to a stock exchange can mitigate financial constraints of firms, using Japanese firm-level data over 20 years, 1995-2014, controlling for main-bank relationship and majority owner influence. Compared to a similar unlisted firm, a listed firm has a lower marginal product of capital on average and more new borrowings in recessions. Theoretically, we argue that these are key pieces of evidence to indicate less tight financial constraints for the listed firms than the unlisted. However, the listed firms do not borrow more on average over time. They rather maintain the lower leverage so that they can mitigate the borrowing constraints. We also find that the listed firms do not face lower interest rates.