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Consolidation, scale economies and technological change in Japanese banking

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  • Tadesse, Solomon

Abstract

The paper examines the technological structure of the Japanese banking sector before the onset of the banking crisis and structural reforms of the 90s in order to shade light on the logic of the recent trend to consolidation in the industry. While diseconomies of scale are shown to be pervasive in the large banks, defying the rationale for consolidation, the paper presents evidence of an underlying technological progress that operates to significantly increase the industry’s efficient minimum size, generating economies at larger banks, thus justifying the ongoing trend in consolidation. The results suggest that, to the extent that consumers can benefit from lower costs of bank production, policies that promote a more concentrated banking structure might be consistent with public interest.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of International Financial Markets, Institutions and Money.

Volume (Year): 16 (2006)
Issue (Month): 5 (December)
Pages: 425-445

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Handle: RePEc:eee:intfin:v:16:y:2006:i:5:p:425-445

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Cited by:
  1. Tara Deelchand & Carol Padgett, 2009. "Size and Scale Economies in Japanese Cooperative Banking," ICMA Centre Discussion Papers in Finance icma-dp2009-02, Henley Business School, Reading University.
  2. Dr. Nader Alber, 2011. "The Effect Of Banking Expansion On Profit Efficiency Of Saudi Arabia Commercial Banks," Journal of Global Business and Economics, Global Research Agency, vol. 3(1), pages 11-23, July.
  3. Sylwester Kozak, 2013. "Consolidation of the banking sector in Poland in 1989-2013 in comparison with the structural changes of the banking sector in the USA and the EU," National Bank of Poland Working Papers 166, National Bank of Poland, Economic Institute.

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