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The efficiency of Japanese financial cooperatives: An application of parametric distance functions

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  • Yamori, Nobuyoshi
  • Harimaya, Kozo
  • Tomimura, Kei

Abstract

This study investigates the efficiency of Japanese credit cooperatives by using a stochastic frontier method based on distance functions. We use a single-step estimation procedure where the parameters of the stochastic frontier and the inefficiency model are estimated simultaneously. Moreover, we focus on the differences in four groups classified by the type of membership. The findings reveal that ethnic minority-owned cooperatives, which have experienced drastic consolidation over the past two decades and increased size, are more efficient than the other groups. The main results are robust to the use of an alternative estimation procedure. This study emphasizes the potential merger effects of small financial cooperatives, but the sustainability of small institutions is not strongly supported.

Suggested Citation

  • Yamori, Nobuyoshi & Harimaya, Kozo & Tomimura, Kei, 2017. "The efficiency of Japanese financial cooperatives: An application of parametric distance functions," Journal of Economics and Business, Elsevier, vol. 94(C), pages 43-53.
  • Handle: RePEc:eee:jebusi:v:94:y:2017:i:c:p:43-53
    DOI: 10.1016/j.jeconbus.2017.09.001
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    More about this item

    Keywords

    Efficiency; Distance functions; Cooperative financial institution;

    JEL classification:

    • C67 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Input-Output Models
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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