Capital Injection, Restructuring Targets and Personnel Management: The Case of Japanese Regional Banks

Crawford School Research Paper

Australian National University – Crawford School of Economics and Government, Asia Pacific Economic Paper No. 390

36 Pages Posted: 20 Jul 2011

See all articles by Kazuki Onji

Kazuki Onji

Australian National University - Crawford School of Economics and Government

Jenny Corbett

Australian National University (ANU) - Crawford School of Public Policy; University of Oxford - Nissan Institute of Japanese Studies; Centre for Economic Policy Research (CEPR)

David Vera

California State University, Fresno - Department of Economics

Date Written: January 1, 2011

Abstract

A case study of the Japanese bank recapitalization by Hoshi and Kashyap (2005) identified a bank that overstated the progress of required personnel downsizing by shifting employees to subsidiaries. This paper asks if the recapitalization program had a systematic flaw in design. We focus on regional banks with a unique panel dataset of 82 banking groups that allows us to observe the employment levels of subsidiaries, in addition to those of parent banks, over fiscal 1994-2006. We estimate a labor-demand equation with sluggish adjustment to compare the employment patterns of public capital recipients and other banks. We found 4 banks increased subsidiary employment after receiving capital injection, but only temporarily. This temporary effect suggests that the personnel shifting was essentially layoffs. Our finding indicates that, despite the limited transparency of personnel sizes on the consolidated basis, rules on capital injection provided incentives for most recipients to pursue downsizing.

Keywords: employment patterns, banking

JEL Classification: J44, J30, G21

Suggested Citation

Onji, Kazuki and Corbett, Jennifer M. and Vera, David R., Capital Injection, Restructuring Targets and Personnel Management: The Case of Japanese Regional Banks (January 1, 2011). Crawford School Research Paper ; Australian National University – Crawford School of Economics and Government, Asia Pacific Economic Paper No. 390. Available at SSRN: https://ssrn.com/abstract=1888771 or http://dx.doi.org/10.2139/ssrn.1888771

Kazuki Onji

Australian National University - Crawford School of Economics and Government ( email )

Building #132
Australian National University
Canberra 0200
Australia

HOME PAGE: http://www.crawford.anu.edu.au/staff/konji.php

Jennifer M. Corbett (Contact Author)

Australian National University (ANU) - Crawford School of Public Policy ( email )

Crawford Building
J.G. Crawford Building, #132, Lennox Crossing
Canberra, Australian Capital Territory 0200
Australia

University of Oxford - Nissan Institute of Japanese Studies ( email )

27 Winchester Road
Oxford OX2 6NA
United Kingdom
01865 274575 (Phone)
01865 274574 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

David R. Vera

California State University, Fresno - Department of Economics ( email )

5245 N. Backer
Fresno, CA 93740
United States

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