What matters more in R&D and Capital Expenditures Financing by Japanese Firms: MULTINATIONALITY OR B

Japanese fi nancial institutions are allowed to hold fi rms' shares and have critical roles in corporate governance generally and in fi nancial and investment policies particularly. The most distinct feature of Japanese corporate governance is the existence of keiretsu groups and main bank relationships. Keiretsu are commonly known as horizontal business groups governed by a socalled main bank. The main bank is the main provider of loans and monitors corporate results. The law restricts banks to a maximum 5% stake in the fi rm. In spite of this restriction, the main bank is often the main shareholder in affi liated companies due to the importance of crossshareholding practices between members of the group. Many studies focus on the implications of the keiretsu system on profi tability, stability of funds, investment policy and other fi nancing features of members. The results are mixed. Hoshi et al. (1991) conclude that keiretsu fi rms invest more than the independents when they are fi nancially distressed. Weinstein and Yafeh (1998) advance that the bank-fi rm relationship in Japan does not improve the profi tability but increases the availability of fi nancing. Hall and Weinstein (2000) fi nd no evidence that a fi rm's lead bank lends more voluntarily to fi nancially distressed keiretsu fi rms than to non-members.