Competition and Risk in Japanese Banking
38 Pages Posted: 26 May 2010 Last revised: 26 Jul 2011
Date Written: July 25, 2011
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: Suggested Citation