Mamoru Nagano

MARKET COMPETITION BEFORE AND AFTER BANK MERGER WAVE: A COMPARATIVE STUDY OF KOREA AND JAPAN

Reflecting recent merger trends in the banking industry of Korea and Japan, this paper examines the degree of competition before and after the bank merger wave. Two major implications are derived from empirical analyses. First, high levels of banking market competitiveness are detected after mergers in both the Korean and Japanese metropolitan areas. Second, although the level of market competition remains low throughout Japanese local cities, it is competitive compared with the metropolitan area of Korea. This paper concludes that market concentration brought about by bank mergers does not always result in low competitiveness. Copyright 2008 The Authors. Journal compilation 2008 Blackwell Publishing Asia Pty Ltd

Real Estate Securitization and the Debt Maturity Structure: Evidence from J-REITs

This paper investigates the relationship between the degree of real estate asset liquidity and liability structure of J-REITs. By employing data of ragionality and usage as new proxies of real estate asset liquidation value, we empirically derived the following implications. First, J-REITs with high ratios of real estate investment assets in a high liquid region, i.e., where the trade frequency per unit area is high, have high debt to equity ratio and long term debt maturity. Second, J-REITs with high concentration ratios of real estate assets traded in small units as the use of residential properties also have high debt to equity ratio and long term debt maturity. In addition, the above relationships are enhanced when the REIT ownership structure is concentrated. In summary, the regional characteristics and type of usage of real estate assets are validated as asset liquidation proxies and they are related to the liability structure of J-REITs. The existence of a block shareholder is regarded as a sponsor firm by market participants and this possibly enhances the above relationship.

Cross-Border Acquisitions in a Transition Economy: Recent Experiences of China and India

This paper examines the causes and consequences of cross-border acquisitions in a transition economy using the 1998-2006 deal data for targeted Chinese and Indian firms and foreign acquirers. Our empirical analysis resulted in three important findings. First, firms with high cash reserve ratio are likely to be targeted in the recent cross-border acquisition trends in China and India; remarkably so when the cash-rich target has a high growth opportunity. Second, cross-border acquisitions bring higher shareholders’ values for foreign acquirers than for domestic acquirers. Third, these empirical results differ from existing literature where acquirer’s shareholder’s return is low in general.

Who Issues Debt Securities in Emerging Countries

This paper focuses on the differences of capital market accessibility and investigates the determinants of firm debt securities issuance in emerging countries. The following results are derived from the empirical analysis. First, country panel analyses showed that the debt securities market development and domestic equity market development were positively related. Second, firm panel data analyses of ASEAN countries suggest that debt securities issuers and frequent equity issuers overlap. Third, analyses of daily stock price data of ASEAN firms reveal that debt securities are not issued for infrequent equity issuers, regardless of the stock price, whereas frequent equity issuers choose debt securities issuance as a funding tool when the stock price is low. Fourth, as compared to accessible frequent equity issuers, market-inaccessible firms are less sensitive to the financial cost of debt securities issuance.

The Regional Effects of Quantitative Easing Monetary Policy in Japan: Evidence from Post-Crisis Firm Data

Abstract This paper investigates the factors that support a funding demand increase in regional economies under easing monetary conditions. The following results were empirically obtained on the basis of individual firms and the 47 regional data in the 2000s in Japan. The first result is that funding demand regionally increases where the relative size of private capital stock is large. This result suggests that industrial agglomeration complements easing monetary policy to induce regional funding demand. The second result is that regional banking soundness in lending markets also contributes to an increase in the funding demand. This suggests that another possible requirement of the money suppliers must be fulfilled to induce the regional funding demand.

What Drives Interregional Bank Branch Closure? The Case of Japan's Regional Banks in the Post-Deregulation Period

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.

Another Determinant of Household Leverage: Evidence from Japan's Mortgage Loan Data*

We investigate determinants of household leverage in Japan, which did not experience the sharp rise in real estate prices and dramatic securitized mortgage market developments in the 2000s, and prove that these determinants are not universal. We employ household sample data collected during 2001–2010 by the Japan Housing Finance Agency and the Nikkei NEEDs Radar Financial Survey, totaling to 28,561 samples. We find that the degree of household interest rate risk preference, which proxies the household constitutional and behavioral factors including risk tolerance, positively relates to the household debt to income ratio. Further, as regards residential mortgage loans, these interest rate risk-preferring households buy higher-priced houses relative to their income, hold fewer financial assets, and tend to be headed by young males. We also find similarities between household mortgage debt determinants in Japan and the United States: the degree of regional bank market competition and the state of bank management soundness influence the aggressiveness of the residential mortgage loan business.