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Does Branch Network Size Influence Positively the Management Performance of Japanese Regional Banks?

Listed author(s):
  • Kondo, Kazumine
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    This paper investigates whether branch network expansions by Japanese regional banks influence their management performances positively at a time when management environments surrounding regional financial institutions have become increasingly severe due to the population decreases and shrinkage of regional economies. Specifically, the effects of numbers of regional bank branches on their credit businesses and profits are empirically examined. The results indicated that regional banks with more branches can increase their loans and bills discounted as well as their small and mid-sized enterprises (SME) loans and bills discounted. Thus, establishing more branches is effective in increasing the total sum of loans and bills discounted by each bank because regional banks with many branches can make contact with more customers. On the other hand, return on assets (ROA) and return on equity (ROE) of regional banks with more branches were found to be lower. Therefore, regarding the cost performance of regional banks, establishing too many branches and maintaining branch networks that are too large can have negative effects on regional banks.

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    File URL: https://mpra.ub.uni-muenchen.de/81257/1/MPRA_paper_81257.pdf
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    Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 81257.

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    Date of creation: 08 Sep 2017
    Handle: RePEc:pra:mprapa:81257
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    1. Robert Feinberg, 2008. "Explaining the Credit Union Entry Decision, and Implications for Performance," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 33(1), pages 81-91, August.
    2. Kazumine Kondo & Kozo Harimaya, 2014. "Why Do Japanese Non-Local Regional Banks Enter Other Prefectures Under the Region-Based Relationship Banking Policy?," Journal of Industry, Competition and Trade, Springer, vol. 14(4), pages 473-485, December.
    3. Hirtle, Beverly J. & Stiroh, Kevin J., 2007. "The return to retail and the performance of US banks," Journal of Banking & Finance, Elsevier, vol. 31(4), pages 1101-1133, April.
    4. Robert Tokle & Joanne Tokle, 2000. "The Influence of Credit Union and Savings and Loan Competition on Bank Deposit Rates in Idaho and Montana," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 17(4), pages 427-439, December.
    5. Astrid A. Dick, 2007. "Market Size, Service Quality, and Competition in Banking," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(1), pages 49-81, 02.
    6. Chong, Beng Soon, 1991. "The Effects of Interstate Banking on Commercial Banks' Risk and Profitability," The Review of Economics and Statistics, MIT Press, vol. 73(1), pages 78-84, February.
    7. Andrew Cohen & Michael Mazzeo, 2010. "Investment Strategies and Market Structure: An Empirical Analysis of Bank Branching Decisions," Journal of Financial Services Research, Springer;Western Finance Association, vol. 38(1), pages 1-21, August.
    8. Ken Holden & Magdi El-Bannany, 2004. "Investment in information technology systems and other determinants of bank profitability in the UK," Applied Financial Economics, Taylor & Francis Journals, vol. 14(5), pages 361-365.
    9. Robert Feinberg, 2009. "Patterns and Determinants of Entry in Rural County Banking Markets," Journal of Industry, Competition and Trade, Springer, vol. 9(2), pages 101-115, June.
    10. Rivard, Richard J. & Thomas, Christopher R., 1997. "The effect of interstate banking on large bank holding company profitability and risk," Journal of Economics and Business, Elsevier, vol. 49(1), pages 61-76, February.
    11. Robert Feinberg, 2002. "Credit Unions: Fringe Suppliers or Cournot Competitors?," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 20(2), pages 105-113, March.
    12. Krol, Robert & Svorny, Shirley, 1996. "The effect of the bank regulatory environment on state economic activity," Regional Science and Urban Economics, Elsevier, vol. 26(5), pages 531-541, August.
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