The main advantages of the bank centred financial

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Unformatted text preview: ly three aspects of the Japanese system which are picked out as different from Western counterparts: labour-market structures and industrial-relations systems; the financial structure and its connection to corporate governance; and the system of industrial organization based around horizontal conglomerates or keiretsu. The main advantages of the bank-centred financial structure were argued to be the provision of (in effect) long-term lending which gave rise to ‘patient capital’. The benefits were seen to be a risk-sharing relationship (as described by Yishay Yafeh in this issue) which, among other things, facilitated higher investment spending generally and higher R&D spending in particular.10 The system is also assumed to have improved information flows and monitoring (Aoki and Patrick, 1994), although this is difficult to establish empirically. These views are not uncontroversial, as is clear from the paper by Hanazaki and Horiuchi, and some would claim that the system merely led to interconnected lending of poor quality and encouraged moral hazard. The financial...
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