Why Do Japanese Non-Local Regional Banks Enter Other Prefectures Under the Region-Based Relationship Banking Policy?

Kazumine Kondo and Kozo Harimaya

MPRA Paper from University Library of Munich, Germany

Abstract: In this study, we investigate the market characteristics of prefectures in which non-local regional banks of other prefectures choose to enter and the motivations of such banks for doing so, considering the Japanese government’s requirements for regional financial institutions to play an active role in stimulating local economies. In particular, by pooling prefecture-level data, the market characteristics of prefectures that experience more entrances by non-local regional banks compared with other prefectures are examined. It was found that entrance by non-local regional banks is more common in prefectures where high-performing companies are active. Therefore, it can be considered that non-local regional banks that are not satisfied with lending opportunities in their home prefectures enter other prefectures to increase their lending opportunities to high-performing companies. This study contributes by clarifying why many regional banks do not concentrate on businesses within their local regions and intentionally enter other prefectures, which is in contrast with the intent of the region-based relationship banking policy.

Keywords: region-based relationship banking; non-local regional banks; entries into other prefectures; characteristics of regional markets; expanding lending opportunities. (search for similar items in EconPapers)
JEL-codes: G21 (search for similar items in EconPapers)
Date: 2013-11-01
New Economics Papers: this item is included in nep-ban, nep-geo and nep-ure
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Journal Article: Why Do Japanese Non-Local Regional Banks Enter Other Prefectures Under the Region-Based Relationship Banking Policy? (2014)
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