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Sales-Maximization vs. Profit-Maximization: Managerial Behavior at Japanese Regional Banks 1980-2009

  • Kozo Harimaya

    ()

    (Faculty of Business Administration, Ritsumeikan University)

  • Takao Ohkawa

    (Faculty of Economics, Ritsumeikan University)

  • Makoto Okamura

    (Faculty of Economics, Ritsumeikan University)

  • Tetsuya Shinkai

    (School of Economics, Kwansei Gakuin University)

In this paper, we analyze the managerial behavior of firms by estimating a nested objective function consistent with the framework of Fershtman and Judd (1987). Using data for Japanese regional banks for FY 1980-FY 2009, we focus on oligopolistic behavior in the domestic loan market and examine the intensity with which managers attempt to maximize sales and profits. We find that sales-maximization explains the behavior of Japanese regional banks more adequately and appropriately than profit-maximization. In particular, yearly fluctuations of the degree of managerial objectives suggest that the effort to maximize sales has intensified after full-scale liberalization of interest rates.

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File URL: http://192.218.163.163/RePEc/pdf/kgdp94.pdf
File Function: First version, 2012
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Paper provided by School of Economics, Kwansei Gakuin University in its series Discussion Paper Series with number 94.

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Length: 14 pages
Date of creation: Sep 2012
Date of revision: Sep 2012
Handle: RePEc:kgu:wpaper:94
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  1. Hirofumi Uchida & Yoshiro Tsutsui, 2002. "Has Competition in the Japanese Banking Sector Improved?," Discussion Papers in Economics and Business 02-09-Rev, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP), revised Sep 2003.
  2. Kano, Masaji & Tsutsui, Yoshiro, 2003. "Geographical segmentation in Japanese bank loan markets," Regional Science and Urban Economics, Elsevier, vol. 33(2), pages 157-174, March.
  3. Uchida, Hirofumi & Nakagawa, Ryuichi, 2007. "Herd behavior in the Japanese loan market: Evidence from bank panel data," Journal of Financial Intermediation, Elsevier, vol. 16(4), pages 555-583, October.
  4. Paul S. Calem & Gerald A. Carlino, 1989. "The concentration/conduct relationship in bank deposit markets," Working Papers 89-26, Federal Reserve Bank of Philadelphia.
  5. Yamori, Nobuyoshi, 1998. "Bureaucrat-managers and corporate governance: expense-preference behaviors in Japanese financial institutions," Economics Letters, Elsevier, vol. 61(3), pages 385-389, December.
  6. Hiroshi Izawa & Yoshiro Tsutsui, 1998. "Managerial objectives in Japanese banking: a test of the expense preference hypothesis," Applied Financial Economics, Taylor & Francis Journals, vol. 8(1), pages 89-99.
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