What is the impact of bankrupt and restructured loans on Japanese bank efficiency?

Mamatzakis, Emmanuel, Matousek, Roman and Vu, Anh Nguyet (2015) What is the impact of bankrupt and restructured loans on Japanese bank efficiency? Journal of Banking & Finance. ISSN 0378-4266

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Abstract

The Japanese banking system provides a distinctive platform for the examination of the long-lasting effect of problem loans on efficiency. We measure technical efficiency by modifying a translog enhanced hyperbolic distance function with two undesirable outputs, identified as problem loans and problem other earning assets. Our unique database allows us to distinguish between bankrupt and restructured loans to investigate the underlying causality between these loans and efficiency. From the flexible panel vector autoregression specification, primary results reveal that bankrupt loans have a positive impact on efficiency related to the “moral hazard, skimping” hypothesis, with the causality originating from bankrupt loans. In contrast, findings for the relationship between restructured loans and efficiency support the “bad luck” hypothesis.

Item Type: Article
Keywords: Bank efficiency; Bankrupt loans; Restructured loans; Panel VAR; Japan
Schools and Departments: School of Business, Management and Economics > Business and Management
Subjects: H Social Sciences
H Social Sciences > HG Finance
Depositing User: Emmanuel Mamatzakis
Date Deposited: 25 Aug 2015 11:21
Last Modified: 06 Mar 2017 16:57
URI: http://sro.sussex.ac.uk/id/eprint/56251

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