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What Drives Interregional Bank Branch Closure? The Case of Japan's Regional Banks in the Post‐Deregulation Period

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  • Mamoru Nagano
  • Tatsuo Ushijima

Abstract

Since the elimination of branch restrictions in the Japanese banking sector, the number of interregional branches closing has exceeded that of new branches being established. By analyzing branch data covering 2000–2012, we find that the probability of interregional branch closures is higher than that of intraregional branch closures because interregional branching worsens banks’ cost efficiency. Further, we show that the geographical distance between branches does not increase the probability of intraregional branch closures, but it does raise the probability of interregional branch closures. Moreover, banks that focus on SME markets have a higher probability of closure in interregional markets than those that focus on household loan markets.

Suggested Citation

  • Mamoru Nagano & Tatsuo Ushijima, 2018. "What Drives Interregional Bank Branch Closure? The Case of Japan's Regional Banks in the Post‐Deregulation Period," International Review of Finance, International Review of Finance Ltd., vol. 18(4), pages 595-635, December.
    • Handle: RePEc:bla:irvfin:v:18:y:2018:i:4:p:595-635
    DOI: 10.1111/irfi.12167
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    Cited by:

    1. Abdussalam Aljadani & Hassen Toumi, 2019. "Causal effect of mergers and acquisitions on EU bank productivity," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 8(1), pages 1-22, December.
    2. A. V. Mishura & S. D. Ageeva, 2020. "Providing Banking Branches in Russian Regions: Assessment of the Role of Distance and Other Factors," Regional Research of Russia, Springer, vol. 10(4), pages 506-512, October.

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