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

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

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.

Citation

Mamatzakis, E., Matousek, R., & Vu, A. N. (2016). What is the impact of bankrupt and restructured loans on Japanese bank efficiency?. Journal of Banking and Finance, 72(Supplement), S187-S202. doi:10.1016/j.jbankfin.2015.04.010

• 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 & 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.