First, it is necessary to define what a Japanese main bank is. The main bank is defined as the financial group (kinyu keiretsu in japanese) in the paper. Financial group is defined in principle by the amount of financing that a bank supplies to a particular borrowing company. When a given company has taken out the largest amount of loans from a particular bank for the past three or more years consecutively, the company is viewed as belonging to that banks financial group. Nearly all the companies listed in the first section of Tokyo Stock Exchange have a main bank. However, these companies borrow not just from their main bank, but from a large number of other banks and financial institution as well. While the main bank is an important lender, the company must also rely on loans from the main banks competitors which in sum far exceed those from the main bank itself.Although the generally accepted notion among researchers in that the main bank relationship in Japan is extremely stable, this evidence suggests that the Japanese main bank is one of much more fluidity than has been generally believed. Now, the paper presents some factors that might account for the actual changing patterns of main bank affiliations. These factors are (a) the uncertainty of companies operating performance, assuming the main bank relationship serves an important function of risk-sharing between companies and banks, it can be derived that an increase in the uncertainty of the business environment for a specific industry should decrease the proportion of companies that change their main bank, thus, changes in main bank affiliation will be systematically related to changes in the uncertainty of the performance of corporate borrowers; (b) the history of the main bank relationship, as the accumulated value of the main bank relationship is assumed to be positively correlated with the duration of the relationship, the longer a company has continued to maintain a main...
