How does economic liberalization affect banks’ profits: empirical evidence from the Japanese banking sector‎?

Faisal Abbas, Adnan Bashir and Shoaib Ali

Macroeconomics and Finance in Emerging Market Economies, 2025, vol. 18, issue 2, 462-481

Abstract: The study applies a GMM framework on the yearly data of Japanese banks ranging from 2001 ‎to 2020 to examine the impact of economic liberalization on the ‎banks' profitability. The results reveal that the relationship between economic liberalization and banks' profitability is positive (negative) for the full sample and commercial (cooperative) banks. The outcomes show that ‎economic liberalization increases banks' profitability during the crisis period. The results indicate that economic liberalization, government integrity, business, ‎investment and financial liberalization adversely (positively) affect the profitability of well-capitalized ‎‎(under-capitalized) banks. Furthermore, the heterogeneity in results have implications for policymakers and bank managers. ‎

Date: 2025
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DOI: 10.1080/17520843.2021.2019452

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