Competition and Risk in Japanese Banking

38 Pages Posted: 26 May 2010 Last revised: 26 Jul 2011

See all articles by Hong Liu

Hong Liu

University of Aberdeen

John O. S. Wilson

University of St. Andrews

Date Written: July 25, 2011

Abstract

We investigate whether the relationship between competition and risk varies across different types of Japanese banks over the period 2000-2009. The results of our empirical investigation show that risk varies across bank types. Specifically, nationwide (City and Trust) banks are riskier on average than their counterparts (Regional, Tier 2 Regional, Shinkin and Credit Cooperative banks) with a regional focus The relationship between competition and risk also varies across bank types based on different initial levels of risk. Iincreasing competition appears to reduce the risk of (City) banks with higher initial levels of risk, but increase the risk of their (Regional, Tier 2 Regional, Shinkin and Credit Cooperative) counterparts with lower initial levels of risk.

Keywords: Banking, Competition, Dynamic Panel Estimation, Japan, Lerner index, Risk

JEL Classification: G21, L1

Suggested Citation

Liu, Hong and Wilson, John O. S., Competition and Risk in Japanese Banking (July 25, 2011). Available at SSRN: https://ssrn.com/abstract=1615330 or http://dx.doi.org/10.2139/ssrn.1615330

Hong Liu

University of Aberdeen ( email )

Dunbar Street
Aberdeen, Scotland AB24 3QY
United Kingdom

John O. S. Wilson (Contact Author)

University of St. Andrews ( email )

North St
Saint Andrews, Fife KY16 9AJ
United Kingdom

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