Why Do Japanese Non-Local Regional Banks Enter Other Prefectures Under the Region-Based Relationship Banking Policy?

Kazumine Kondo () and Kozo Harimaya

Journal of Industry, Competition and Trade, 2014, vol. 14, issue 4, 473-485

Abstract: In this study, we investigate the market characteristics of prefectures in which non-local regional banks of other prefectures choose to enter and their motivations for doing so, considering the Japanese government’s requirements for regional financial institutions to actively stimulate their local economies. In particular, by pooling prefecture-level data, the market characteristics of prefectures that experience more entrances by non-local regional banks compared with other prefectures are examined. It was found that entrance by non-local regional banks is more common in prefectures containing active high-performing companies. Hence, it can be considered that non-local regional banks that are not satisfied with lending opportunities in their home prefectures enter other prefectures to increase their lending opportunities to high-performing companies. This study contributes to the clarification of why many regional banks do not concentrate on businesses within their local regions and intentionally enter other prefectures, which is in contrast with the intent of the region-based relationship banking policy. Copyright Springer Science+Business Media New York 2014

Keywords: Region-based relationship banking; Non-local regional banks; Entries into other prefectures; Characteristics of regional markets; Expanding lending opportunities; G21 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (3)

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DOI: 10.1007/s10842-014-0176-2

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