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Assessing the condition of Japanese banks: how informative are accounting earnings?

  • Hesna Genay
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    This article examines the accounting and stock market performance of banks from 1991 to 1997. Overall, the results indicate that the accounting, disclosure, and regulatory practices of Japanese banks have drive a wedge between their accounting and stock market returns in recent years and, furthermore, that regulatory forbearance might have become a more important source of value to shareholders than the value of assets in place.

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    Article provided by Federal Reserve Bank of Chicago in its journal Economic Perspectives.

    Volume (Year): (1998)
    Issue (Month): Q IV ()
    Pages: 12-34

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    Handle: RePEc:fip:fedhep:y:1998:i:qiv:p:12-34:n:v.22no.4
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    1. Stephen F. LeRoy, 1990. "Mutual deposit insurance," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue jun8.
    2. Allen N. Berger, 1994. "The relationship between capital and earnings in banking," Finance and Economics Discussion Series 94-2, Board of Governors of the Federal Reserve System (U.S.).
    3. Hesna Genay, 1993. "The ownership structure of Japanese financial institutions," Working Paper Series, Issues in Financial Regulation 93-19, Federal Reserve Bank of Chicago.
    4. Joe Peek & Eric S. Rosengren, 1997. "Collateral damage: effects of the Japanese real estate collapse on credit availability and real activity in the United States," Working Papers 97-5, Federal Reserve Bank of Boston.
    5. Rebecca S. Demsetz & Marc R. Saidenberg & Philip E. Strahan, 1996. "Banks with something to lose: the disciplinary role of franchise value," Economic Policy Review, Federal Reserve Bank of New York, issue Oct, pages 1-14.
    6. Demirguc, Asli & Huizinga, Harry, 1999. "Determinants of Commercial Bank Interest Margins and Profitability: Some International Evidence," World Bank Economic Review, World Bank Group, vol. 13(2), pages 379-408, May.
    7. Takeo Hoshi & Anil Kashyap & David Scharfstein, 1989. "Corporate structure, liquidity, and investment: evidence from Japanese industrial groups," Finance and Economics Discussion Series 82, Board of Governors of the Federal Reserve System (U.S.).
    8. George J. Benston & George G. Kaufman, 1998. "Deposit insurance reform in the FDIC Improvement Act: the experience to date," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q II, pages 2-20.
    9. Edward J. Kane & Haluk Unal, 1988. "Modeling Structural and Temporal Variation in the Market's Valuation of Banking Firms," NBER Working Papers 2693, National Bureau of Economic Research, Inc.
    10. Pyle, David H., 1986. "Capital regulation and deposit insurance," Journal of Banking & Finance, Elsevier, vol. 10(2), pages 189-201, June.
    11. Allen B. Frankel & Paul B. Morgan, 1992. "Deregulation and competition in Japanese banking," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Aug, pages 579-593.
    12. David E. Weinstein & Yishay Yafeh, 1998. "On the Costs of a Bank-Centered Financial System: Evidence from the Changing Main Bank Relations in Japan," Journal of Finance, American Finance Association, vol. 53(2), pages 635-672, 04.
    13. Berger, Allen N. & King, Kathleen Kuester & O'Brien, James M., 1991. "The limitations of market value accounting and a more realistic alternative," Journal of Banking & Finance, Elsevier, vol. 15(4-5), pages 753-783, September.
    14. Kaplan, Steven N. & Minton, Bernadette A., 1994. "Appointments of outsiders to Japanese boards: Determinants and implications for managers," Journal of Financial Economics, Elsevier, vol. 36(2), pages 225-258, October.
    15. Lisa K. Ashley & Elijah Brewer, III & Nancy E. Vincent, 1998. "Access to FHLBank advances and the performance of thrift institutions," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q II, pages 33-52.
    16. Kane, Edward J., 1986. "Appearance and reality in deposit insurance: The case for reform," Journal of Banking & Finance, Elsevier, vol. 10(2), pages 175-188, June.
    17. Michael S. Gibson, 1996. "More evidence on the link between bank health and investment in Japan," International Finance Discussion Papers 549, Board of Governors of the Federal Reserve System (U.S.).
    18. John Ammer & Michael S. Gibson, 1996. "Regulation and the cost of capital in Japan: a case study," International Finance Discussion Papers 556, Board of Governors of the Federal Reserve System (U.S.).
    19. Sheard, Paul, 1989. "The main bank system and corporate monitoring and control in Japan," Journal of Economic Behavior & Organization, Elsevier, vol. 11(3), pages 399-422, May.
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