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Banks Restructuring Sonata: How Capital Injection Triggered Labor Force Rejuvenation in Japanese Banks

Author

Listed:
  • Osada Takeshi

    (Takeshi Osada, Faculty of Economics and Graduate School of Humanities and Social Sciences, Saitama University, Shimookubo 255, Sakura-ku, Saitama, 338-8570Japan)

  • Onji Kazuki

    (Graduate School of Economics, Osaka University, 1-7 Machikaneyamacho, Toyonaka, Osaka, 560-0043, Japan)

  • Vera David

    (Department of Economics, California State University Fresno, 5245 N. Backer Ave M/S PB20, Fresno, CA93740-8001, USA)

Abstract
Divergent interests of bank managers and financial regulators potentially compromise the efficacy of bank rescue operations. This study empirically investigates the agency problem encountered in a capital injection program implemented in Japan. We hypothesize that the operations requirement to reduce workforce lead banks to overstate the extent of downsizing by reassigning older workers to bank subsidiaries. We implement a difference-in-differences analysis using a panel of Japanese banks from 1990 to 2010. We also employ propensity score matching to control for sample selection bias. The result shows that injected banks exhibit workforce rejuvenation relative to non-injected banks. Among injected banks, the average employee age falls by approximately 1 year, which is equivalent to a reduction of approximately seventy 65-year-old workers. On an unconsolidated basis, the number of employees in injected banks decreases as a response to the injection. However, on a consolidated basis, which accounts for subsidiary employment, the number of employees does not decrease. Our finding suggests that the Japanese practice of lifetime employment (LTE) survived, albeit in a limited form, among restructured banks.

Suggested Citation

  • Osada Takeshi & Onji Kazuki & Vera David, 2017. "Banks Restructuring Sonata: How Capital Injection Triggered Labor Force Rejuvenation in Japanese Banks," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 17(2), pages 1-25, April.
    • Handle: RePEc:bpj:bejeap:v:17:y:2017:i:2:p:25:n:4
    DOI: 10.1515/bejeap-2016-0059
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    More about this item

    Keywords

    recapitalization program; lifetime employment; Japanese banks;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • J40 - Labor and Demographic Economics - - Particular Labor Markets - - - General

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