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Were regulatory interventions effective in lowering systemic risk during the financial crisis in Japan?

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  • Shimizu, Katsutoshi
  • Ly, Kim Cuong

Abstract

This study empirically examines the effectiveness of various regulatory interventions on systemic risk during the financial crisis in Japan. Our findings generally show that the regulatory interventions worked effectively through the liquidity provision. That is, the public fund injection programs, the prompt corrective actions, and the blanket guarantee reduced systemic risk. The simple government intervention package to bail out distressed “too-big-to-fail” banks stabilized the banking system via the external channel whereas the massive bailout scheme suffered the “too-many-to-fail” problem in the sense that it increased systemic risk through both direct spillover and external channels. This study suggests that the effective government intervention should be restricted to a limited number of bailouts to reduce systemic risk.

Suggested Citation

  • Shimizu, Katsutoshi & Ly, Kim Cuong, 2017. "Were regulatory interventions effective in lowering systemic risk during the financial crisis in Japan?," Journal of Multinational Financial Management, Elsevier, vol. 41(C), pages 80-91.
  • Handle: RePEc:eee:mulfin:v:41:y:2017:i:c:p:80-91
    DOI: 10.1016/j.mulfin.2017.07.001
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    More about this item

    Keywords

    Financial crisis; Systemic risk; Deposit insurance; Public fund injection; Bank failure;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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