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Consolidation, scale economies and technological change in Japanese banking

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  • Tadesse, Solomon
Abstract
The paper examines the technological structure of the Japanese banking sector before the onset of the banking crisis and structural reforms of the 90s in order to shade light on the logic of the recent trend to consolidation in the industry. While diseconomies of scale are shown to be pervasive in the large banks, defying the rationale for consolidation, the paper presents evidence of an underlying technological progress that operates to significantly increase the industry???s efficient minimum size, generating economies at larger banks, thus justifying the ongoing trend in consolidation. The results suggest that, to the extent that consumers can benefit from lower costs of bank production, policies that promote a more concentrated banking structure might be consistent with public interest.
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  • Tadesse, Solomon, 2006. "Consolidation, scale economies and technological change in Japanese banking," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 16(5), pages 425-445, December.
    • Handle: RePEc:eee:intfin:v:16:y:2006:i:5:p:425-445
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    Cited by:

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    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. Emmanuel Mamatzakis & Roman Matousek & Anh Nguyet Vu, 2019. "What is the impact of problem loans on Japanese bank productivity growth?," Financial Markets, Institutions & Instruments, John Wiley & Sons, vol. 28(2), pages 213-240, May.
    4. Mamatzakis, Emmanuel & Matousek, Roman & Vu, Anh Nguyet, 2016. "What is the impact of bankrupt and restructured loans on Japanese bank efficiency?," Journal of Banking & Finance, Elsevier, vol. 72(S), pages 187-202.
    5. Degl’Innocenti, Marta & Girardone, Claudia, 2012. "Ownership, diversification and cost advantages: Evidence from the Italian leasing industry," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 22(4), pages 879-896.
    6. Besstremyannaya, Galina, 2017. "Heterogeneous effect of the global financial crisis and the Great East Japan Earthquake on costs of Japanese banks," Journal of Empirical Finance, Elsevier, vol. 42(C), pages 66-89.
    7. Dr. Nader Alber, 2011. "The Effect Of Banking Expansion On Profit Efficiency Of Saudi Arabia Commercial Banks," Journal of Global Business and Economics, Global Research Agency, vol. 3(1), pages 11-23, July.
    8. Mamatzakis, Emmanuel & matousek, roman & vu, anh, 2019. "The interplay between problem loans and Japanese bank productivity," MPRA Paper 92960, University Library of Munich, Germany.
    9. Abhiman Das & Sangeeta Das, 2007. "Scale economies, cost complementarities and technical progress in Indian banking: evidence from fourier flexible functional form," Applied Economics, Taylor & Francis Journals, vol. 39(5), pages 565-580.
    10. Tara Deelchand & Carol Padgett, 2009. "Size and Scale Economies in Japanese Cooperative Banking," ICMA Centre Discussion Papers in Finance icma-dp2009-02, Henley Business School, University of Reading.
    11. Sylwester Kozak, 2013. "Consolidation of the banking sector in Poland in 1989-2013 in comparison with the structural changes of the banking sector in the USA and the EU," NBP Working Papers 166, Narodowy Bank Polski.
    12. Giovanna Aguilar & Jhonatan Portilla, 2017. "Cambio técnico en el sector regulado de las microfinanzas peruanas: 2003-2015," Documentos de Trabajo / Working Papers 2017-446, Departamento de Economía - Pontificia Universidad Católica del Perú.

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    More about this item

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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