Size and Scale Economies in Japanese Cooperative Banking

Tara Deelchand () and Carol Padgett ()
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Tara Deelchand: ICMA Centre, University of Reading
Carol Padgett: ICMA Centre, University of Reading

ICMA Centre Discussion Papers in Finance from Henley Business School, University of Reading

Abstract: The Japanese banking industry, including the cooperative sector has been restructured following the crisis of the 1990s. Here we examine the relationship between size and scale economies of cooperative banks in Japan (namely Shinkin and credit cooperatives). We use the translog cost-function methodology and intermediation approach coupled with a large set of both cross-sectional and panel data over the period 2003 to 2006. We find significant diseconomies of scale for both the full sample and sub-samples of small and large cooperative banks. It is of interest to note that larger cooperative banks were at cost disadvantage as compared to small ones throughout most of the period. Thus, bigger is not always better. Shinkin and credit cooperative banks need to make further efforts to assess the business environment and strengthen profitability by, for example, expanding the range of financial services they offer in their regional areas and making further progress in risk management.

Keywords: banking; cooperative banks; scale economies; size; shinkin and credit cooperatives; translog-cost function (search for similar items in EconPapers)
JEL-codes: D21 D24 G21 L23 N25 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2009-03
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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