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Consolidation, Scale Economies and Technological Change in Japanese Banking

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  • Solomon Tadesse

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Abstract

The paper examines the technological structure of the Japanese banking sector before the onset of the banking crisis and structural reforms of the 90s in order to shade light on the logic of the recent trend to consolidation in the industry. While diseconomies of scale are shown to be pervasive in the large banks, defying the rationale for consolidation, the paper presents evidence of an underlying technological progress that operates to significantly increase the industry’s efficient minimum size, generating economies at larger banks, thus justifying the ongoing trend in consolidation. The results suggest that, to the extent that consumers can benefit from lower costs of bank production, policies that promote a more concentrated banking structure might be consistent with public interest.

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File URL: http://www.wdi.umich.edu/files/Publications/WorkingPapers/wp747.pdf
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Bibliographic Info

Paper provided by William Davidson Institute at the University of Michigan in its series William Davidson Institute Working Papers Series with number wp747.

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Length: pages
Date of creation: 01 Feb 2005
Date of revision:
Handle: RePEc:wdi:papers:2005-747

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Keywords: Scale Economies; Technical Change; Banking;

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References

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  16. Kim, H Youn, 1986. "Economies of Scale and Economies of Scope in Multiproduct Financial Institutions: Further Evidence from Credit Unions: A Note," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 18(2), pages 220-26, May.
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  20. Jeffrey A. Clark, 1988. "Economies of scale and scope at depository financial institutions: a review of the literature," Economic Review, Federal Reserve Bank of Kansas City, issue Sep, pages 16-33.
  21. David Humphrey, 1993. "Cost and technical change: Effects from bank deregulation," Journal of Productivity Analysis, Springer, vol. 4(1), pages 9-34, June.
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Cited by:
  1. Tara Deelchand & Carol Padgett, 2009. "Size and Scale Economies in Japanese Cooperative Banking," ICMA Centre Discussion Papers in Finance icma-dp2009-02, Henley Business School, Reading University.
  2. Sylwester Kozak, 2013. "Consolidation of the banking sector in Poland in 1989-2013 in comparison with the structural changes of the banking sector in the USA and the EU," National Bank of Poland Working Papers 166, National Bank of Poland, Economic Institute.
  3. Dr. Nader Alber, 2011. "The Effect Of Banking Expansion On Profit Efficiency Of Saudi Arabia Commercial Banks," Journal of Global Business and Economics, Global Research Agency, vol. 3(1), pages 11-23, July.

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