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

Mamatzakis, Emmanuel; Matousek, Roman; Vu, Anh Nguyet

Authors

Emmanuel Mamatzakis

Roman Matousek

Anh Nguyet Vu



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.

Journal Article Type Article
Acceptance Date Apr 10, 2015
Online Publication Date Apr 20, 2015
Publication Date 2016-11
Deposit Date Mar 11, 2019
Journal Journal of Banking and Finance
Print ISSN 0378-4266
Publisher Elsevier
Peer Reviewed Peer Reviewed
Volume 72
Issue Supplement
Pages S187-S202
DOI https://doi.org/10.1016/j.jbankfin.2015.04.010
Keywords JEL classification:; C23; D24; C1; G21; Keywords:; Bank efficiency; Bankrupt loans; Restructured loans; Panel VAR; Japan
Public URL https://nottingham-repository.worktribe.com/output/1625132
Publisher URL https://www.sciencedirect.com/science/article/pii/S0378426615001004
Additional Information This article is maintained by: Elsevier; Article Title: What is the impact of bankrupt and restructured loans on Japanese bank efficiency?; Journal Title: Journal of Banking & Finance; CrossRef DOI link to publisher maintained version: https://doi.org/10.1016/j.jbankfin.2015.04.010; Content Type: article; Copyright: © 2015 Elsevier B.V. All rights reserved.


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