Consolidation of Banks in Japan

Kaoru Hosono, Koji Sakai and Kotaro Tsuru

in Financial Sector Development in the Pacific Rim

Published by University of Chicago Press

Published in print April 2009 | ISBN: 9780226386843
Published online February 2013 | e-ISBN: 9780226386867 | DOI:
Consolidation of Banks in Japan

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This chapter investigates the causes and consequences of the consolidation among Japanese banks from 1990 to 2004. It tests four motives for mergers and aquisitions (M&A): (1) improving bank efficiency; (2) strengthening market power; (3) exploiting a policy of too-big-to-fail; and (4) managerial empire building. The results suggest that the government's too-big-to-fail policy or its attempt at stabilizing the local financial market through consolidations played an important role in the 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 postcrisis period, while the market-power motive seems to have driven the M&As conducted by regional banks and corporative (shinkin) banks. There is no evidence that supports managerial motives for empire building.

Keywords: Japanese banks; consolidation; mergers and aquisitions; efficiency; shinkin; banking regulation

Chapter.  18287 words.  Illustrated.

Subjects: Business and Management

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