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The Governance Structures of Japanese Credit Associations and Their Objective Functions

Kondo, Kazumine (2018): The Governance Structures of Japanese Credit Associations and Their Objective Functions.

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Although Japanese credit associations are nonprofit cooperative financial institutions, they shoulder the same financial functions as regional banks that are stock companies and they could compete with each other in a regional market. On the other hand, governance structures of credit associations tend to make disciplines be weaker than those of regional banks and their performances might be better than regional banks for these reasons. In the present paper, we empirically investigated whether the objective functions of credit associations are different from those of regional banks with considering the differences of their governance structures. As a result, although significant differences of profitability of these two types of institutions were not detected, it was also demonstrated that credit associations can capture more share of deposits than regional banks and the former are more conservative in risk taking than the latter. From these, there is a possibility that Japanese credit associations have different objective functions from regional banks.

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