Silent Large Shareholders and Entrenched Bank Management: Evidence from the Banking Crisis in Japan
AbstractWe investigate the cause of this banking crisis that has jeopardized the stability of the financial and economic system since the 1990s. Following Hanazaki and Horiuchi (2001), we argue that the deficiency of effective corporate governance of banks in Japan has caused inefficient management. Our focus here is the role of largest shareholders who happen to be banks and insurers. We argue that these large shareholders appear to collude or conspire with management instead of being tough monitors. Consequently, the management became entrenched. Our empirical results show that during the 1980s these "entrenched banks" extended more lending. Even after the collapse of the bubble in the 1990s, they did not dramatically undertake restructuring to cope with the accumulated bad loans.
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Bibliographic InfoPaper provided by Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University in its series CEI Working Paper Series with number 2004-1.
Length: 35 p.
Date of creation: Jan 2004
Date of revision:
Corporate Governance; Ownership Structure; Managerial Entrenchment; Shareholders Activism;
Find related papers by JEL classification:
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
- G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Fukao, Mitsuhiro, 2001. "Financial Deregulations, Weakness of Market Discipline, and Market Development: Japan's Experience and Lessons for Developing Countries," CEI Working Paper Series 2001-17, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
- Randall Morck & Masao Nakamura, 1999. "Banks and Corporate Control in Japan," Journal of Finance, American Finance Association, vol. 54(1), pages 319-339, 02.
- Hoshi, Takeo, 2002. "The convoy system for insolvent banks: how it originally worked and why it failed in the 1990s," Japan and the World Economy, Elsevier, vol. 14(2), pages 155-180, April.
- van Rixtel,Adrian, 2007.
"Informality and Monetary Policy in Japan,"
Cambridge University Press, number 9780521039444, October.
- Yener Altunbaş & Alper Kara & Adrian van Rixtel, 2007. "Corporate governance and corporate ownership: The investment behaviour of Japanese institutional investors," Banco de Espaï¿½a Occasional Papers 0703, Banco de Espa�a.
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