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Role of Inter-bank Networks in the Pre-war Japanese Financial System

Tetsuji Okazaki and Michiru Sawada
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Tetsuji Okazaki: Faculty of Economics, University of Tokyo

No CARF-J-021, CARF J-Series from Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo

Abstract: This paper investigates the impact of bank consolidations promoted by government policy, using data from pre-war Japan when the Ministry of Finance promoted bank consolidations by dint of the Bank Law of 1927. It is found that policy-promoted consolidation had a positive effect on deposit growth, especially in the period when the financial system was unstable. On the other hand, it had a negative effect on profitability, particularly when there was no dominant bank among the participants or when more than two banks participated in the consolidation. Policy-promoted consolidation in such cases was likely to be accompanied by large organizational cost.

Pages: 21 pages
Date: 2006-03
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Persistent link: https://EconPapers.repec.org/RePEc:cfi:jseres:cj021

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