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Consolidation of Banks in Japan: Causes and Consequences

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Author Info
Kaoru Hosono
Koji Sakai
Kotaro Tsuru

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Abstract

We investigate the motives and consequences of the consolidation of banks in Japan during the period of fiscal year 1990-2004 using a comprehensive dataset. Our analysis suggests that the government's too-big-to-fail policy played an important role in the mergers and acquisitions (M&As), though its attempt does not seem to have been successful. The efficiency-improving motive also seems to have driven the M&As conducted by major banks and regional banks in the post-crisis period, while the market-power motive seems to have driven the M&As conducted by regional banks and corporative (shinkin) banks. We obtain no evidence that supports managerial motives for empire building.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13399.

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Date of creation: Sep 2007
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Handle: RePEc:nbr:nberwo:13399

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Find related papers by JEL classification:
G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Mortgages
G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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  1. Nobuyoshi Yamori & Kozo Harimaya & Kazumine Kondo, 2003. "Are Banks Affiliated with Bank Holding Companies More Efficient Than Independent Banks? The Recent Experience Regarding Japanese Regional BHCs," Asia-Pacific Financial Markets, Springer, vol. 10(4), pages 359-376, December. [Downloadable!] (restricted)
  2. Mitchell, Mark L. & Mulherin, J. Harold, 1996. "The impact of industry shocks on takeover and restructuring activity," Journal of Financial Economics, Elsevier, vol. 41(2), pages 193-229, June. [Downloadable!] (restricted)
  3. Rhoades, Stephen A., 1998. "The efficiency effects of bank mergers: An overview of case studies of nine mergers," Journal of Banking & Finance, Elsevier, vol. 22(3), pages 273-291, March. [Downloadable!] (restricted)
  4. Gayle Delong & Robert Deyoung, 2007. "Learning by Observing: Information Spillovers in the Execution and Valuation of Commercial Bank M&As," Journal of Finance, American Finance Association, vol. 62(1), pages 181-216, 02. [Downloadable!] (restricted)
  5. Focarelli, Dario & Pozzolo, Alberto Franco, 2003. "Where Do Banks Expand Abroad? An Empirical Analysis," Economics & Statistics Discussion Papers esdp03009, University of Molise, Dept. SEGeS. [Downloadable!]
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  6. Joe Peek & Eric S. Rosengren, 2005. "Unnatural Selection: Perverse Incentives and the Misallocation of Credit in Japan," American Economic Review, American Economic Association, vol. 95(4), pages 1144-1166, September. [Downloadable!]
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  7. Ricardo J. Caballero & Takeo Hoshi & Anil K. Kashyap, 2006. "Zombie Lending and Depressed Restructuring in Japan," NBER Working Papers 12129, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  8. Takeo Hoshi & Anil Kashyap, 2004. "Corporate Financing and Governance in Japan: The Road to the Future," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262582481, December.
  9. Bliss, Richard T. & Rosen, Richard J., 2001. "CEO compensation and bank mergers," Journal of Financial Economics, Elsevier, vol. 61(1), pages 107-138, July. [Downloadable!] (restricted)
  10. Kano, Masaji & Tsutsui, Yoshiro, 2003. "Geographical segmentation in Japanese bank loan markets," Regional Science and Urban Economics, Elsevier, vol. 33(2), pages 157-174, March. [Downloadable!] (restricted)
  11. Shleifer, Andrei & Vishny, Robert W., 2003. "Stock market driven acquisitions," Journal of Financial Economics, Elsevier, vol. 70(3), pages 295-311, December. [Downloadable!] (restricted)
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  12. Kaoru Hosono & Koji Sakai & Kotaro Tsuru, 2006. "Consolidation of Cooperative Banks (Shinkin) in Japan:Motives and Consequences," Discussion papers 06034, Research Institute of Economy, Trade and Industry (RIETI). [Downloadable!]
  13. Harford, Jarrad, 2005. "What drives merger waves?," Journal of Financial Economics, Elsevier, vol. 77(3), pages 529-560, September. [Downloadable!] (restricted)
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