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Size and Scale Economies in Japanese Cooperative Banking

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  • Tara Deelchand

    ()
    (ICMA Centre, University of Reading)

  • Carol Padgett

    ()
    (ICMA Centre, University of Reading)

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    Abstract

    The Japanese banking industry, including the cooperative sector has been restructured following the crisis of the 1990s. Here we examine the relationship between size and scale economies of cooperative banks in Japan (namely Shinkin and credit cooperatives). We use the translog cost-function methodology and intermediation approach coupled with a large set of both cross-sectional and panel data over the period 2003 to 2006. We find significant diseconomies of scale for both the full sample and sub-samples of small and large cooperative banks. It is of interest to note that larger cooperative banks were at cost disadvantage as compared to small ones throughout most of the period. Thus, bigger is not always better. Shinkin and credit cooperative banks need to make further efforts to assess the business environment and strengthen profitability by, for example, expanding the range of financial services they offer in their regional areas and making further progress in risk management.

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    Bibliographic Info

    Paper provided by Henley Business School, Reading University in its series ICMA Centre Discussion Papers in Finance with number icma-dp2009-02.

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    Length: 31 pages
    Date of creation: Mar 2009
    Date of revision:
    Handle: RePEc:rdg:icmadp:icma-dp2009-02

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    Related research

    Keywords: banking; cooperative banks; scale economies; size; shinkin and credit cooperatives; translog-cost function;

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    References

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