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Consolidation of Banks in Japan: Causes and Consequences

  • Kaoru Hosono
  • Koji Sakai
  • Kotaro Tsuru

We investigate the motives and consequences of the consolidation of banks in Japan during the period of fiscal year 1990-2004 using a comprehensive dataset. Our analysis suggests that the government's too-big-to-fail policy played an important role in the mergers and acquisitions (M&As), though its attempt does not seem to have been successful. The efficiency-improving motive also seems to have driven the M&As conducted by major banks and regional banks in the post-crisis period, while the market-power motive seems to have driven the M&As conducted by regional banks and corporative (shinkin) banks. We obtain no evidence that supports managerial motives for empire building.

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File URL: http://www.nber.org/papers/w13399.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13399.

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Date of creation: Sep 2007
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Publication status: published as Consolidation of Banks in Japan: Causes and Consequences , Kaoru Hosono, Koji Sakai, Kotaro Tsuru. in Financial Sector Development in the Pacific Rim, East Asia Seminar on Economics, Volume 18 , Ito and Rose. 2009
Handle: RePEc:nbr:nberwo:13399
Note: ME IO
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  1. Joe Peek & Eric S. Rosengren, 2005. "Unnatural Selection: Perverse Incentives and the Misallocation of Credit in Japan," American Economic Review, American Economic Association, vol. 95(4), pages 1144-1166, September.
  2. Bliss, Richard T. & Rosen, Richard J., 2001. "CEO compensation and bank mergers," Journal of Financial Economics, Elsevier, vol. 61(1), pages 107-138, July.
  3. Mitchell, Mark L. & Mulherin, J. Harold, 1996. "The impact of industry shocks on takeover and restructuring activity," Journal of Financial Economics, Elsevier, vol. 41(2), pages 193-229, June.
  4. Gayle Delong & Robert Deyoung, 2007. "Learning by Observing: Information Spillovers in the Execution and Valuation of Commercial Bank M&As," Journal of Finance, American Finance Association, vol. 62(1), pages 181-216, 02.
  5. Fabio Panetta & Dario Focarelli, 2003. "Are Mergers Beneficial to Consumers? Evidence from the Italian Market for Bank Deposits," CEIS Research Paper 10, Tor Vergata University, CEIS.
  6. 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.
  7. 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).
  8. Ricardo J. Caballero & Takeo Hoshi & Anil K. Kashyap, 2008. "Zombie Lending and Depressed Restructuring in Japan," American Economic Review, American Economic Association, vol. 98(5), pages 1943-77, December.
  9. Harford, Jarrad, 2005. "What drives merger waves?," Journal of Financial Economics, Elsevier, vol. 77(3), pages 529-560, September.
  10. Andrei Shleifer & Robert W. Vishny, 2001. "Stock Market Driven Acquisitions," NBER Working Papers 8439, National Bureau of Economic Research, Inc.
  11. Dario Focarelli & Alberto Franco Pozzolo, 2005. "Where Do Banks Expand Abroad? An Empirical Analysis," The Journal of Business, University of Chicago Press, vol. 78(6), pages 2435-2464, November.
  12. 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, vol. 10(4), pages 359-376, December.
  13. Takeo Hoshi & Anil Kashyap, 2004. "Corporate Financing and Governance in Japan: The Road to the Future," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262582481, June.
  14. Rhoades, Stephen A., 1998. "The efficiency effects of bank mergers: An overview of case studies of nine mergers," Journal of Banking & Finance, Elsevier, vol. 22(3), pages 273-291, March.
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