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Herd Behavior in the Japanese Loan Market: Evidence from Bank Panel Data

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  • Ryuichi Nakagawa
  • Hirofumi Uchida

Abstract

This paper investigates whether Japanese banks had been following herd behavior in the domestic loan market from 1975 through 2002. Applying the technique developed by Lakonishok, Shleifer, and Vishny (LSV) (1992, J. of Fin. Econ.) to the data of loans outstanding to different types of borrowers, we obtain evidence indicative of the existence of herding. Consistent herding during the entire sample period is observed among regional banks, whereas city banks had been following a cyclical herd behavior with one peak around the bubble period in the late 1980s. Even after adjusting for herding resulting from rational or institutional factors, we still observe herding for regional banks in the entire period, whereas herding only in the bubble period remains for city banks. The results would indicate that regional banks had been consistently following irrational herd behavior, while city banks were frantic enough to herd only in the bubble period in the late 1980s

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Bibliographic Info

Paper provided by Econometric Society in its series Econometric Society 2004 Australasian Meetings with number 161.

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Date of creation: 11 Aug 2004
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Handle: RePEc:ecm:ausm04:161

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Keywords: herd behavior; LSV herding measure; adjusted herding measure; banks; loan market; Japan;

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References

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Citations

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Cited by:
  1. Demirer, Riza & Kutan, Ali M. & Chen, Chun-Da, 2010. "Do investors herd in emerging stock markets?: Evidence from the Taiwanese market," Journal of Economic Behavior & Organization, Elsevier, vol. 76(2), pages 283-295, November.
  2. Diana Bonfim & Moshe Kim, 2012. "Liquidity risk in banking: is there herding?," Working Papers w201218, Banco de Portugal, Economics and Research Department.
  3. Claude Fluet & Paolo G. Garella, 2013. "Debt Rescheduling with Multiple Lenders: Relying on the Information of Others," Cahiers de recherche 1332, CIRPEE.
  4. Emmanuel Frot & Javier Santiso, 2009. "Herding in Aid Allocation," OECD Development Centre Working Papers 279, OECD Publishing.
  5. Kozo Harimaya & Takao Ohkawa & Makoto Okamura & Tetsuya Shinkai, 2012. "Sales-Maximization vs. Profit-Maximization: Managerial Behavior at Japanese Regional Banks 1980-2009," Discussion Paper Series 94, School of Economics, Kwansei Gakuin University, revised Sep 2012.

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