An Analysis of the Issue Who Monitors the Monitor: The Impact of Amakudari on Bank Performances

Katsutoshi Shimizu and Akiyoshi Horiuchi
Additional contact information
Akiyoshi Horiuchi: Faculty of Economics, University of Tokyo.

No 97-F-4, CIRJE F-Series from CIRJE, Faculty of Economics, University of Tokyo

Abstract: Banks are recognized as playing an important role of monitoring borrowers, thereby reducing the agency costs associated with informational asymmetry. However, there remains an issue "who could monitor the banks", because it is difficult for outsiders to monitor banks' management. In particular, the banks should be motivated to be prudent in their management under the comprehensive safety net. This paper investigates whether the human relationship between the regulatory authorities and private banks named as "amakudari" has been effective as a tool of prudential regulation in Japan. The amakudari is pervading in the sense that most private banks are accepting officials retired from the Ministry of Finance and/or the Bank of Japan in their top managerial and board positions. However, according to statistics in this paper, the amakudari tended to induce accepting banks to decrease their equity capital, and to extend their risk-taking. This paper concludes that the amakudari made the Japanese banking system fragile rather than being effective as a monitoring device of bank management.

Pages: 45 pages
Date: 1997-01
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.cirje.e.u-tokyo.ac.jp/research/dp/97/f4/contents.htm (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:tky:fseres:97f04

Access Statistics for this paper

More papers in CIRJE F-Series from CIRJE, Faculty of Economics, University of Tokyo Contact information at EDIRC.
Bibliographic data for series maintained by CIRJE administrative office ().