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Monitoring the Monitors: The Corporate Governance in Japanese Banks and Their Real Estate Lending in the 1980s

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  • I. Serdar Dinç

    (Northwestern University)

Abstract

The corporate governance role of banks in "bank-centered" countries like Japan has been well studied. This article studies the corporate governance in Japanese banks. It shows that large shareholders restrained bank managers from real estate lending in the 1980s. However, this effect was absent for the shareholders who belonged to the same keiretsu (corporate grouping) as the bank. Relationship banking and cross shareholding prevented these shareholders from disciplining the bank managers. In financial systems where banks play a large role in corporate governance, the more effective the banks are in monitoring other companies, the more difficult it may become to monitor bank managers.

Suggested Citation

  • I. Serdar Dinç, 2006. "Monitoring the Monitors: The Corporate Governance in Japanese Banks and Their Real Estate Lending in the 1980s," The Journal of Business, University of Chicago Press, vol. 79(6), pages 3057-3082, November.
  • Handle: RePEc:ucp:jnlbus:v:79:y:2006:i:6:p:3057-3082
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    File URL: http://dx.doi.org/10.1086/508008
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    Cited by:

    1. Dam, Lammertjan & Koetter, Michael, 2011. "Bank bailouts, interventions, and moral hazard," Discussion Paper Series 2: Banking and Financial Studies 2011,10, Deutsche Bundesbank.
    2. repec:fip:fedhpr:y:2011:i:may:p:299-326 is not listed on IDEAS

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