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Effects of a bank consolidation promotion policy: Evaluating Bank Law in 1927 Japan

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Author Info
Tetsuji Okazaki (Faculty of Economics, University of Tokyo)
Michiru Sawada (Faculty of Economics, Nagoyagakuin University)

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Abstract

This paper investigates the impact of bank consolidations promoted by government policy, using data from pre-war Japan when the Ministry of Finance promoted bank consolidations by dint of the Bank Law of 1927. It is found that policy-promoted consolidation had a positive effect on deposit growth, especially in the period when the financial system was unstable. On the other hand, it had a negative effect on profitability, particularly when there was no dominant bank among the participants or when more than two banks participated in the consolidation. Policy-promoted consolidation in such cases was likely to be accompanied by large organizational cost.

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Paper provided by CIRJE, Faculty of Economics, University of Tokyo in its series CIRJE F-Series with number CIRJE-F-400.

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Length: 37pages
Date of creation: Feb 2006
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Handle: RePEc:tky:fseres:2006cf400

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  3. Cornett, Marcia Millon & Tehranian, Hassan, 1992. "Changes in corporate performance associated with bank acquisitions," Journal of Financial Economics, Elsevier, vol. 31(2), pages 211-234, April. [Downloadable!] (restricted)
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  7. Mark Carlson & Kris James Mitchener, 2005. "Branch banking, bank competition, and financial stability," Finance and Economics Discussion Series 2005-20, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
  8. Shih, Michael S. H., 2003. "An investigation into the use of mergers as a solution for the Asian banking sector crisis," The Quarterly Review of Economics and Finance, Elsevier, vol. 43(1), pages 31-49. [Downloadable!] (restricted)
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  10. Tetsuji Okazaki & Kazuki Yokoyama, 2001. "Measuring the Extent and Implications of Director Interlocking in the Pre-war Japanese Banking Industry," CIRJE F-Series CIRJE-F-138, CIRJE, Faculty of Economics, University of Tokyo. [Downloadable!]
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  11. Dean Amel & Colleen Barnes & Fabio Panetta & Carmelo Salleo, 2002. "Consolidation and efficiency in the financial sector: a review of the international evidence," Finance and Economics Discussion Series 2002-47, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
  12. Allen N. Berger & David B. Humphrey, 1992. "Megamergers in banking and the use of cost efficiency as an antitrust defense," Finance and Economics Discussion Series 203, Board of Governors of the Federal Reserve System (U.S.).
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  14. Demsetz, Rebecca S & Strahan, Philip E, 1997. "Diversification, Size, and Risk at Bank Holding Companies," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(3), pages 300-313, August.
  15. Yabushita Shiro & Inoue Atsushi, 1993. "The Stability of the Japanese Banking System: A Historical Perspective," Journal of the Japanese and International Economies, Elsevier, vol. 7(4), pages 387-407, December. [Downloadable!] (restricted)
  16. Dean Amel & Colleen Barnes & Fabio Panetta & Carmelo Salleo, 2002. "Consolidation and efficiency in the financial sector: a review of the international evidence," Temi di discussione (Economic working papers) 464, Bank of Italy, Economic Research Department. [Downloadable!]
  17. Jalal D. Akhavein & Allen N. Berger & David B. Humphrey, 1997. "The effects of megamergers on efficiency and prices: evidence from a bank profit function," Finance and Economics Discussion Series 1997-9, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
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  18. Mark Carlson & Kris James Mitchener, 2005. "Branch Banking, Bank Competition, and Financial Stability," NBER Working Papers 11291, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  19. Mitchener, Kris James, 2005. "Bank Supervision, Regulation, and Instability During the Great Depression," The Journal of Economic History, Cambridge University Press, vol. 65(01), pages 152-185, March. [Downloadable!]
  20. Benston, George J & Hunter, William C & Wall, Larry D, 1995. "Motivations for Bank Mergers and Acquisitions: Enhancing the Deposit Insurance Put Option versus Earnings Diversification," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(3), pages 777-88, August. [Downloadable!] (restricted)
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(explanations, 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.)

  1. Mototsugu Shintani & Tomoyoshi Yabu & and Daisuke Nagakura, 2008. "Spurious Regressions in Technical Trading: Momentum or Contrarian?," IMES Discussion Paper Series 08-E-9, Institute for Monetary and Economic Studies, Bank of Japan. [Downloadable!]
  2. Kris J. Mitchener & Mari Ohnuki, 2008. "Institutions, Competition, and Capital Market Integration in Japan," NBER Working Papers 14090, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  3. Kris James Mitchener & Mari Ohnuki, 2008. "Institutions, Competition, and Capital Market Integration in Japan," IMES Discussion Paper Series 08-E-12, Institute for Monetary and Economic Studies, Bank of Japan. [Downloadable!]
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