What Drives Interregional Bank Branch Closure? The Case of Japan's Regional Banks in the Post‐Deregulation Period1. (29th December 2017)

• Record Type: Journal Article
• Authors: Nagano, Mamoru; Ushijima, Tatsuo
• Is Part Of: International review of finance. Volume 18:Number 4(2018:Dec.)
• Page Start: 595
• Page End: 635
• Publication Date: 2017-12-29
• Subjects: Finance -- Periodicals; Financial institutions -- Periodicals; 332.673
• DOI: 10.1111/irfi.12167
• Languages: English
• ISSNs: 1369-412X

Abstract

Abstract: Since the elimination of branch restrictions in the Japanese banking sector, the number of interregional branches closing has exceeded that of new branches being established. By analyzing branch data covering 2000–2012, we find that the probability of interregional branch closures is higher than that of intraregional branch closures because interregional branching worsens banks' cost efficiency. Further, we show that the geographical distance between branches does not increase the probability of intraregional branch closures, but it does raise the probability of interregional branch closures. Moreover, banks that focus on SME markets have a higher probability of closure in interregional markets than those that focus on household loan markets.