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Impact of nontraditional activities on scale and scope economies: A case study of Japanese regional banks

  • Harimaya, Kozo

The recent financial deregulation in Japanese banking has enabled regional banks to engage in trust businesses. This paper examines the impact of such nontraditional banking activities on cost structure by measuring economies of scale and scope. A generalized translog cost function, which can take zero outputs into consideration, is employed to simultaneously investigate entrants and non-entrants. While ray scale economies are observed for trust businesses, product-specific scale economies are not. Further, cost complementarities are not observed in almost all the pairwise combinations of the products. Thus, entering into the trust business yields no cost reduction for Japanese regional banks.

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Article provided by Elsevier in its journal Japan and the World Economy.

Volume (Year): 20 (2008)
Issue (Month): 2 (March)
Pages: 175-193

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Handle: RePEc:eee:japwor:v:20:y:2008:i:2:p:175-193
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505557

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