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Are Banks Affiliated with Bank Holding Companies More Efficient Than Independent Banks? The Recent Experience Regarding Japanese Regional BHCs

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  • Nobuyoshi Yamori

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  • Kozo Harimaya
  • Kazumine Kondo

Abstract

Few studies have investigated whether Japanese banks affiliated with bank holding companies are more efficient and profitable than independent banks. The present paper tests this hypothesis by using both a stochastic frontier approach and a market valuation approach. First, our results suggest that banks affiliated with bank holding companies are not more cost-efficient than are independent banks. Because of the brief history of Japanese BHCs, it is fair to conclude that the formation of regional bank holding companies has not achieved efficiency gains so far. Second, we find that banks affiliated with bank holding companies are more profit-efficient than are independent banks. This is particularly apparent when the establishment of the bank holding companies increases market power in regional markets. This supports the Financial Services Agency’s policy to increase the profitability of regional banks through bank consolidation. Finally, based on standard event study methodology, we find that the market did not regard news about the establishment of bank holding companies as significant events. Copyright Springer Science + Business Media, Inc. 2003

Suggested Citation

  • Nobuyoshi Yamori & Kozo Harimaya & Kazumine Kondo, 2003. "Are Banks Affiliated with Bank Holding Companies More Efficient Than Independent Banks? The Recent Experience Regarding Japanese Regional BHCs," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 10(4), pages 359-376, December.
  • Handle: RePEc:kap:apfinm:v:10:y:2003:i:4:p:359-376
    DOI: 10.1007/s10690-005-4246-7
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    File URL: http://hdl.handle.net/10.1007/s10690-005-4246-7
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Francesco Aiello & Graziella Bonanno, 2018. "On The Sources Of Heterogeneity In Banking Efficiency Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 32(1), pages 194-225, February.
    2. Liu, Hsiang-Hsi & Huang, Chin-Wei & Chiu, Yung-Ho & Huang, Hsiao-Chin, 2015. "Using A Three Stage Super-Sbm Model To Analyze The Influence Of Bank'S Internationalization And Risk On The Operational Efficiency," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 56(2), pages 213-229, December.
    3. Francesco Aiello & Graziella Bonanno, 2016. "Efficiency in banking: a meta-regression analysis," International Review of Applied Economics, Taylor & Francis Journals, vol. 30(1), pages 112-149, January.
    4. George E. Halkos & Roman Matousek & Nickolaos G. Tzeremes, 2016. "Pre-evaluating technical efficiency gains from possible mergers and acquisitions: evidence from Japanese regional banks," Review of Quantitative Finance and Accounting, Springer, vol. 46(1), pages 47-77, January.
    5. repec:eee:finana:v:54:y:2017:i:c:p:144-158 is not listed on IDEAS
    6. Sawada, Michiru, 2013. "How does the stock market value bank diversification? Empirical evidence from Japanese banks," Pacific-Basin Finance Journal, Elsevier, vol. 25(C), pages 40-61.
    7. Kaoru Hosono & Koji Sakai & Kotaro Tsuru, 2009. "Consolidation of Banks in Japan: Causes and Consequences," NBER Chapters,in: Financial Sector Development in the Pacific Rim, East Asia Seminar on Economics, Volume 18, pages 265-309 National Bureau of Economic Research, Inc.
    8. repec:eee:japwor:v:46:y:2018:i:c:p:41-49 is not listed on IDEAS
    9. Yoshiaki Ogura & Hirofumi Uchida, 2014. "Bank Consolidation and Soft Information Acquisition in Small Business Lending," Journal of Financial Services Research, Springer;Western Finance Association, vol. 45(2), pages 173-200, April.
    10. Kaoru Hosono & Koji Sakai & Kotaro Tsuru, 2006. "Consolidation of Cooperative Banks (Shinkin) in Japan:Motives and Consequences," Discussion papers 06034, Research Institute of Economy, Trade and Industry (RIETI).

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