Bank valuation and size: Evidence from Japan

Hideaki Sakawa, Naoki Watanabel, Hitoshi Sasaki and Noriko Tanahashi

Pacific-Basin Finance Journal, 2020, vol. 63, issue C

Abstract: This study empirically analyzes whether the valuation of large commercial banks increases with their size. We investigate publicly listed banks in Japan because the Japanese financial system is known to be bank-centered and has several large-sized banks that can be treated as “too-big-to-fail” (TBTF). Our results weakly support the positive relationship between size and Tobin's q for Japanese banks, different from banks in the United States. This implies that a kind of TBTF premium exists, owing to the safety-net function of Japanese banks. However, the benefits of the TBTF premium vanish after controlling for bank fixed effects. Thus, we conjecture that Japanese TBTF banks engage in riskier bank activities, which results in lowering their valuations, as in the case of U.S. banks.

Keywords: Bank size; Bank valuation; Too-big-to-fail (search for similar items in EconPapers)
JEL-codes: G21 G28 G32 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:63:y:2020:i:c:s0927538x20302638

DOI: 10.1016/j.pacfin.2020.101403

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