Since the beginning of the 1990s, Japanese banks have become saddled with huge amounts of non-performing loans and a significant number of them have failed. We investigate the cause of this banking crisis that has jeo...Since the beginning of the 1990s, Japanese banks have become saddled with huge amounts of non-performing loans and a significant number of them have failed. We investigate the cause of this banking crisis that has jeopardized the stability of the financial and economic system. Following Hanazaki （2001）, we argue that the deficiency of effective corporate governance of banks in Japan has caused inefficient management. Our focus here is the role of large shareholders who happen to be banks and insurers. We argue that these large shareholders appear to collude or conspire with management instead of being tough monitors. Consequently, the management became entrenched. Our empirical results show that during the 1980s these ＂entrenched banks＂ extended more lending. Even after the collapse of the bubble in the 1990s, they did not dramatically undertake restructuring to cope with the accumulated bad loans.展开更多
文摘Since the beginning of the 1990s, Japanese banks have become saddled with huge amounts of non-performing loans and a significant number of them have failed. We investigate the cause of this banking crisis that has jeopardized the stability of the financial and economic system. Following Hanazaki （2001）, we argue that the deficiency of effective corporate governance of banks in Japan has caused inefficient management. Our focus here is the role of large shareholders who happen to be banks and insurers. We argue that these large shareholders appear to collude or conspire with management instead of being tough monitors. Consequently, the management became entrenched. Our empirical results show that during the 1980s these ＂entrenched banks＂ extended more lending. Even after the collapse of the bubble in the 1990s, they did not dramatically undertake restructuring to cope with the accumulated bad loans.
