CIRJE-F-400 | "Effects of a bank consolidation promotion policy: Evaluating Bank Law in 1927 Japan" |
Author Name | Okazaki, Tetsuji and Michiru Sawada |
Date | February 2006 |
Full Paper | PDF file@ |
Remarks | Subsequently published in Financial History Review, April 2007, v. 14, iss. 1, pp. 29-61. |
Abstract |
This paper investigates the impact of bank consolidations promoted by government policy, using
data from pre-war Japan when the Ministry of Finance promoted bank consolidations by dint of the
Bank Law of 1927. It is found that policy-promoted consolidation had a positive effect on deposit
growth, especially in the period when the financial system was unstable. On the other hand, it had a
negative effect on profitability, particularly when there was no dominant bank among the
participants or when more than two banks participated in the consolidation. Policy-promoted
consolidation in such cases was likely to be accompanied by large organizational cost.
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