Silent Large Shareholders and Entrenched Bank Management: Evidence from the Banking Crisis in Japan

Masaharu Hanazaki, 正晴 花崎, マサハル ハナザキ, Toshiyuki Souma, 利行 相馬, トシユキ ソウマ, Yupana Wiwattanakantang () and ユパナ ウィワッタナカンタン

No 2004-1, CEI Working Paper Series from Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University

Abstract: We investigate the cause of this banking crisis that has jeopardized the stability of the financial and economic system since the 1990s. Following Hanazaki and Horiuchi (2001), we argue that the deficiency of effective corporate governance of banks in Japan has caused inefficient management. Our focus here is the role of largest shareholders who happen to be banks and insurers. We argue that these large shareholders appear to collude or conspire with management instead of being tough monitors. Consequently, the management became entrenched. Our empirical results show that during the 1980s these "entrenched banks" extended more lending. Even after the collapse of the bubble in the 1990s, they did not dramatically undertake restructuring to cope with the accumulated bad loans.

Keywords: Corporate Governance; Ownership Structure; Managerial Entrenchment; Shareholders Activism (search for similar items in EconPapers)
JEL-codes: G21 G33 G38 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2004-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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