Consolidation of Banks in Japan: Causes and Consequences

Author Name HOSONO Kaoru  (Gakushuin University) /SAKAI Koji  (Japan Society for the Promotion of Science) /TSURU Kotaro  (Senior Fellow, RIETI)
Creation Date/NO. October 2007 07-E-059
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We investigate the motives and consequences of the consolidation of banks in Japan during the period of fiscal year 1990-2004 using a comprehensive dataset. Our analysis suggests that the government's too-big-to-fail policy played an important role in the mergers and acquisitions (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 post-crisis period, while the market-power motive seems to have driven the M&As conducted by regional banks and corporative (shinkin) banks. We obtain no evidence that supports managerial motives for empire building.