The time has come for banks to say goodbye: New evidence on bank roles and duration effects in relationship terminations

Examining a loan-level matched sample of Japanese banks and firms, we study the factors determining the termination of bank–firm relationships. We find that such terminations are mainly driven by bank-side factors and that these bank-driven terminations increase when banks’ capital conditions worsen. Furthermore, a longer relationship duration decreased the probability of termination substantially when the Japanese banking system was stable, whereas the duration effects weakened when the system became fragile.