Yukihiro Yasuda

Factors affecting bank risk taking: Evidence from Japan

Abstract Using recent data from Japan, this paper examines empirically the determinants of risk taking at commercial banks. We find that the implementation of the capital adequacy requirement reduced risk taking at commercial banks. The acceptance of retired government officials on banks’ boards has an insignificant effect on bank risk. The relationship between the stable shareholders’ ownership and bank risk is nonlinear; the risk decreases initially with the ownership by stable shareholders, and then increases as the asset substitution effect dominates the effect of managerial entrenchment on bank risk. The decline of franchise value increases bank risk.

The Relationship Between Bank Risk and Earnings Management: Evidence from Japan

Using stock price data drawn from the 1990s in Japan, this paper empirically shows that bank risk is negatively associated with discretionary accruals, indicating that investors misinterpreted high reported earnings as favorable information about bank financial health. We also show that the negative relationship was very powerful prior to the major bank failures in late 1997 and 1998, but it diminished subsequent to the failures. We conclude that investors started to anticipate potential manipulation of financial reports by bank managers more rationally after the major bank failures.

Does Corporate Lending by Banks and Life Insurance Companies Differ?: Evidence from Japanese Economy in the Early 1980s

Comparing loans made by main banks to those made by life insurance companies, we test for the existence of specialization in corporate lending. Using a detailed data set with information on individual loans made in Japan in the early 1980s, we empirically examine credit specialization on the part of lenders by investigating the relationship between the concentration of loans from main banks and those from life insurance companies. Empirical evidence suggests that the amounts of loans made by main bank are negatively associated with those by life insurance companies, which is consistent with the lending characteristics of life insurance companies that are known as “Marginal Lenders”.