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Capital injection, restructuring targets and personnel management: The case of Japanese regional banks

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  • Onji, Kazuki
  • Vera, David
  • Corbett, Jenny

Abstract

A case study of the Japanese bank recapitalization by Hoshi and Kashyap (2005) identified a bank that overstated the progress of required personnel downsizing by shifting employees to subsidiaries. This paper asks if the recapitalization program had a design flaw. We focus on regional banks with a unique panel dataset of 81 banking groups that allows us to observe the employment levels of subsidiaries, in addition to those of parent banks, over fiscal 1994–2006. We estimate a labor-demand equation with sluggish adjustment to compare the employment patterns of public capital recipients and other banks. The result indicates that the shuffling of personnel to subsidiaries was a common response among banks that received large capital injections. Our finding highlights a tension between a reconstruction program and labor law when a country has a tight law on dismissal.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of the Japanese and International Economies.

Volume (Year): 26 (2012)
Issue (Month): 4 ()
Pages: 495-517

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Handle: RePEc:eee:jjieco:v:26:y:2012:i:4:p:495-517

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Web page: http://www.elsevier.com/locate/inca/622903

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Keywords: Recapitalization program; Employee downsizing;

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References

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  1. Freixas, Xavier & Lóránth, Gyöngyi & Morrison, Alan, 2005. "Regulating Financial Conglomerates," CEPR Discussion Papers 5036, C.E.P.R. Discussion Papers.
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  4. Hoshi, Takeo & Kashyap, Anil K, 2010. "Will the U.S. bank recapitalization succeed? Eight lessons from Japan," Journal of Financial Economics, Elsevier, vol. 97(3), pages 398-417, September.
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  6. Windmeijer, Frank, 2005. "A finite sample correction for the variance of linear efficient two-step GMM estimators," Journal of Econometrics, Elsevier, vol. 126(1), pages 25-51, May.
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  8. Ashcraft, Adam B., 2006. "New Evidence on the Lending Channel," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 38(3), pages 751-775, April.
  9. M Arellano & O Bover, 1990. "Another Look at the Instrumental Variable Estimation of Error-Components Models," CEP Discussion Papers dp0007, Centre for Economic Performance, LSE.
  10. Hiroshi Nakaso, 1999. "Recent banking sector reforms in Japan," Economic Policy Review, Federal Reserve Bank of New York, issue Jul, pages 1-7.
  11. Roger H. Gordon & James R. Hines Jr., 2002. "International Taxation," NBER Working Papers 8854, National Bureau of Economic Research, Inc.
  12. Kato, Takao, 2001. "The End of Lifetime Employment in Japan?: Evidence from National Surveys and Field Research," Journal of the Japanese and International Economies, Elsevier, vol. 15(4), pages 489-514, December.
  13. Montgomery, Heather & Shimizutani, Satoshi, 2009. "The effectiveness of bank recapitalization policies in Japan," Japan and the World Economy, Elsevier, vol. 21(1), pages 1-25, January.
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Citations

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Cited by:
  1. Montgomery, Heather & Takahashi, Yuki, 2011. "Bank recapitalization in the U.S. - lessons from Japan," MPRA Paper 33147, University Library of Munich, Germany.
  2. Chen, Sichong, 2013. "How do leverage ratios affect bank share performance during financial crises: The Japanese experience of the late 1990s," Journal of the Japanese and International Economies, Elsevier, vol. 30(C), pages 1-18.
  3. Kazuki Onji & Takeshi Osada & David Vera, 2014. "Banks restructuring sonata: How capital injection triggered labor force rejuvenation in Japanese banks," Discussion Papers in Economics and Business 14-22, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP).
  4. Ushijima, Tatsuo & Schaede, Ulrike, 2014. "The market for corporate subsidiaries in Japan: An empirical study of trades among listed firms," Journal of the Japanese and International Economies, Elsevier, vol. 31(C), pages 36-52.

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