Do Branch Network Sizes of Regional Banks Influence Their Management Performances Positively?

Author Name KONDO Kazumine (Aichi Gakuin University)
Creation Date/NO. July 2017 17-J-045
Research Project The Role of Regional Financial Institutions toward Regional Revitalization: How do regional financial institutions contribute to improving the quality of employment in the local economy?
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This paper investigates whether branch network sizes of regional banks influence their management performances positively under the region-based relationship banking policy. Specifically, the effect of branch numbers of regional banks on their credit businesses and profits are empirically examined. As a result, it was found that regional banks with more branches can increase their loans and bills discounted as well as their small and mid-sized enterprises (SME) loans and bills. Thus, establishing more branches is effective in increasing the sum of loans and bills discounted of each bank because regional banks with many branches can come in contact with more customers. On the other hand, it was found that return on assets (ROA) and return on equity (ROE) of regional banks with more branches are lower. When we focus on the cost performances of regional banks, establishing too many branches and keeping branch networks that are too large might have negative effects on regional banks.

Published: Kondo, Kazumine, 2018. "Does branch network size influence positively the management performance of Japanese regional banks?" Applied Economics, Vol. 50(56), pp. 6061-6072