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Consolidation of Banks in Japan: Causes and Consequences

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  • Kaoru Hosono
  • Koji Sakai
  • Kotaro Tsuru

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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Bibliographic Info

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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Publication status: published as Consolidation of Banks in Japan: Causes and Consequences , Kaoru Hosono, Koji Sakai, Kotaro Tsuru. in Financial Sector Development in the Pacific Rim, East Asia Seminar on Economics, Volume 18 , Ito and Rose. 2009
Handle: RePEc:nbr:nberwo:13399

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  1. Dario Focarelli & Alberto Franco Pozzolo, 2005. "Where Do Banks Expand Abroad? An Empirical Analysis," The Journal of Business, University of Chicago Press, vol. 78(6), pages 2435-2464, November.
  2. 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, American Finance Association, vol. 62(1), pages 181-216, 02.
  3. Joe Peek & Eric S. Rosengren, 2003. "Unnatural Selection: Perverse Incentives and the Misallocation of Credit in Japan," NBER Working Papers 9643, National Bureau of Economic Research, Inc.
  4. Harford, Jarrad, 2005. "What drives merger waves?," Journal of Financial Economics, Elsevier, Elsevier, vol. 77(3), pages 529-560, September.
  5. 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, Springer, vol. 10(4), pages 359-376, December.
  6. 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.
  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.
  8. 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.
  9. Shleifer, Andrei & Vishny, Robert W., 2003. "Stock market driven acquisitions," Journal of Financial Economics, Elsevier, Elsevier, vol. 70(3), pages 295-311, December.
  10. 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.
  11. Mitchell, Mark L. & Mulherin, J. Harold, 1996. "The impact of industry shocks on takeover and restructuring activity," Journal of Financial Economics, Elsevier, Elsevier, vol. 41(2), pages 193-229, June.
  12. Fabio Panetta & Dario Focarelli, 2003. "Are Mergers Beneficial to Consumers? Evidence from the Italian Market for Bank Deposits," CEIS Research Paper 10, Tor Vergata University, CEIS.
  13. Bliss, Richard T. & Rosen, Richard J., 2001. "CEO compensation and bank mergers," Journal of Financial Economics, Elsevier, Elsevier, vol. 61(1), pages 107-138, July.
  14. 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).
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Cited by:
  1. Harada, Kimie & Ito, Takatoshi, 2011. "Did mergers help Japanese mega-banks avoid failure? Analysis of the distance to default of banks," Journal of the Japanese and International Economies, Elsevier, vol. 25(1), pages 1-22, March.
  2. Mathias Hoffmann & Toshihiro Okubo, 2012. "'By a Silken Thread': regional banking integration and pathways to financial development in Japan's Great Recession," ECON - Working Papers, Department of Economics - University of Zurich 102, Department of Economics - University of Zurich.
  3. Giannetti, Mariassunta & Simonov, Andrei, 2009. "On the Real Effects of Bank Bailouts: Micro-Evidence from Japan," CEPR Discussion Papers 7441, C.E.P.R. Discussion Papers.
  4. Yoshiaki Ogura & Hirofumi Uchida, 2014. "Bank Consolidation and Soft Information Acquisition in Small Business Lending," Journal of Financial Services Research, Springer, vol. 45(2), pages 173-200, April.

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