Search results

The purpose of this paper is to investigate the efficiency of the banking business of Japan’s agricultural cooperatives (JAs), which depend heavily on financial business with non-farmers, contradictory to cooperative principles.

The authors construct a panel data set over 2005–2016 from the financial statements of JAs’ prefectural-level federations and use the input distance stochastic frontier model with a time-variant inefficiency effect for analysis. Both the flow and stock measures of the banking output are used in identical models and the efficiency results are compared. The authors also investigate the determinants of efficiency by using the Tobit and ordinary least squares regression models.

There is strong evidence of significant prefectural differences in efficiency values. The ratio of lending to non-members to total loans is positively related to efficiency. In contrast, the higher reliance on a central organization and credit business leads to lower efficiency.

Apart from banking, JAs provide mutual insurance business services. As the authors investigate only the efficiency of JAs’ banking business in this study, it would be necessary to investigate the efficiency of their insurance business as well when evaluating JAs’ overall financial business.

There are few studies that investigate the efficiency of JAs’ banking business and its determinants, although significant attention has been paid to their excessive dependence on the financial business.

The purpose of this paper is to examine whether branch expansions have realized efficiency gains by focussing on regional banks in Japan.

The authors use a single-step estimation procedure, where both cost frontier parameters and inefficiency effects are addressed simultaneously, and examine the impact of expanding branch networks on bank performance.

The findings show that regional banks expanding their branch networks to certain levels exhibit lower cost inefficiencies. Robustness results are also obtained from the samples, excluding the regional banks located in urban regions.

The findings suggest that adequate levels of branch expansion have beneficial impacts for regional banks, although this result is contrary to the current region-based relationship banking policy promoted by Japan’s financial regulators.