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Capital injection, restructuring targets and personnel management: The case of Japanese regional banks

  • Onji, Kazuki
  • Vera, David
  • Corbett, Jenny

A case study of the Japanese bank recapitalization by Hoshi and Kashyap (2005) identified a bank that overstated the progress of required personnel downsizing by shifting employees to subsidiaries. This paper asks if the recapitalization program had a design flaw. We focus on regional banks with a unique panel dataset of 81 banking groups that allows us to observe the employment levels of subsidiaries, in addition to those of parent banks, over fiscal 1994–2006. We estimate a labor-demand equation with sluggish adjustment to compare the employment patterns of public capital recipients and other banks. The result indicates that the shuffling of personnel to subsidiaries was a common response among banks that received large capital injections. Our finding highlights a tension between a reconstruction program and labor law when a country has a tight law on dismissal.

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Article provided by Elsevier in its journal Journal of the Japanese and International Economies.

Volume (Year): 26 (2012)
Issue (Month): 4 ()
Pages: 495-517

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Handle: RePEc:eee:jjieco:v:26:y:2012:i:4:p:495-517
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622903

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