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Impact of nontraditional activities on scale and scope economies: A case study of Japanese regional banks

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  • Harimaya, Kozo

Abstract

The recent financial deregulation in Japanese banking has enabled regional banks to engage in trust businesses. This paper examines the impact of such nontraditional banking activities on cost structure by measuring economies of scale and scope. A generalized translog cost function, which can take zero outputs into consideration, is employed to simultaneously investigate entrants and non-entrants. While ray scale economies are observed for trust businesses, product-specific scale economies are not. Further, cost complementarities are not observed in almost all the pairwise combinations of the products. Thus, entering into the trust business yields no cost reduction for Japanese regional banks.

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  • Harimaya, Kozo, 2008. "Impact of nontraditional activities on scale and scope economies: A case study of Japanese regional banks," Japan and the World Economy, Elsevier, vol. 20(2), pages 175-193, March.
    • Handle: RePEc:eee:japwor:v:20:y:2008:i:2:p:175-193
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    Cited by:

    1. Montgomery, Heather & Harimaya, Kozo & Takahashi, Yuki, 2014. "Too big to succeed? Banking sector consolidation and efficiency," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 32(C), pages 86-106.
    2. Uchida, Hirofumi & Satake, Mitsuhiko, 2009. "Market discipline and bank efficiency," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 19(5), pages 792-802, December.
    3. Maximilian J. B. Hall & Richard Simper, 2013. "Efficiency and competition in Korean banking," Applied Financial Economics, Taylor & Francis Journals, vol. 23(10), pages 881-890, May.
    4. Besstremyannaya, Galina, 2017. "Heterogeneous effect of the global financial crisis and the Great East Japan Earthquake on costs of Japanese banks," Journal of Empirical Finance, Elsevier, vol. 42(C), pages 66-89.

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