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Why Do Japanese Non-Local Regional Banks Enter Other Prefectures Under the Region-Based Relationship Banking Policy?

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  • Kondo, Kazumine
  • Harimaya, Kozo

Abstract

In this study, we investigate the market characteristics of prefectures in which non-local regional banks of other prefectures choose to enter and the motivations of such banks for doing so, considering the Japanese government’s requirements for regional financial institutions to play an active role in stimulating local economies. In particular, by pooling prefecture-level data, the market characteristics of prefectures that experience more entrances by non-local regional banks compared with other prefectures are examined. It was found that entrance by non-local regional banks is more common in prefectures where high-performing companies are active. Therefore, it can be considered that non-local regional banks that are not satisfied with lending opportunities in their home prefectures enter other prefectures to increase their lending opportunities to high-performing companies. This study contributes by clarifying why many regional banks do not concentrate on businesses within their local regions and intentionally enter other prefectures, which is in contrast with the intent of the region-based relationship banking policy.

Suggested Citation

  • Kondo, Kazumine & Harimaya, Kozo, 2013. "Why Do Japanese Non-Local Regional Banks Enter Other Prefectures Under the Region-Based Relationship Banking Policy?," MPRA Paper 51134, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:51134
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    Cited by:

    1. Kazumine Kondo & David McMillan, 2015. "Cross-prefecture expansion of regional banks in Japan and its effects on lending-based income," Cogent Economics & Finance, Taylor & Francis Journals, vol. 3(1), pages 1017947-101, December.
    2. Harimaya, Kozo, 2018. "The effects of consolidation on bank cost savings: Evidence from Japanese regional banks," Japan and the World Economy, Elsevier, vol. 46(C), pages 41-49.
    3. Kondo, Kazumine, 2017. "Does Branch Network Size Influence Positively the Management Performance of Japanese Regional Banks?," MPRA Paper 81257, University Library of Munich, Germany.

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    More about this item

    Keywords

    region-based relationship banking; non-local regional banks; entries into other prefectures; characteristics of regional markets; expanding lending opportunities.;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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