The Global Financial Crisis and Small- and Medium-sized Enterprises in Japan: How did they cope with the crisis?

Author Name OGAWA Kazuo  (Osaka University) /TANAKA Takanori  (Ritsumeikan University)
Creation Date/NO. February 2012 12-E-012
Research Project Research on Efficient Corporate Financing and Inter-firm Networks
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In this paper, we examine the nature of the shocks that hit the small- and medium-sized enterprises (SMEs) in Japan during the global financial crisis that occurred in the wake of the massive number of non-performing subprime loans in the U.S. We examine how the SMEs responded to the shocks, using the unique surveys that were conducted by the Research Institute of Economy, Trade and Industry (RIETI) in 2008 and 2009. The shocks were identified as demand, supply and financial shocks. The demand shock was the most prevalent, while the financial shock was the least frequent. The SMEs took a spectrum of measures against the demand shock by seeking help from suppliers and financial institutions. We find that the measures taken by the SMEs crucially depended on the bank-firm relationship, but not on the customer-supplier relationship. The bank-dependent SMEs asked their closely-affiliated financial institutions for help, while the SMEs that were less dependent on financial institutions sought help primarily from their suppliers.