TY - JOUR
T1 - The objective function of government-controlled banks in a financial crisis
AU - Ogura, Yoshiaki
N1 - Funding Information:
This paper is a result of research by the Study Group at the Small and Medium Enterprise (SME) Unit of the Japan Finance Corporation (JFC) and the Study Group on Dynamics of Corporate Finance and Corporate Behavior at the Research Institute of Economy, Trade, and Industry (RIETI) in Tokyo, Japan. This paper is a revised version of RIETI discussion paper series 16E004 with the same title. I gratefully acknowledge the SME Unit of JFC for allowing us to access the internal credit information for our research. This study was financially support by a grant-in-aid from Zengin Foundation for Studies on Economics and Finance, and a Waseda University Grant for Special Research Project (2016-K008). I thank Naoto Soda for his excellent research assistance. I am also grateful for insightful comments by anonymous referees of this journal, Alyssa Anderson, Masahisa Fujita, Gen Hamada, Kaoru Hosono, Daisuke Miyakawa, Masayuki Morikawa, Atsushi Nakajima, Keiichiro Oda, Hiroshi Ohashi, Yoshiaki Shikano, Katsutoshi Shimizu, Hirofumi Uchida, Taisuke Uchino, Ken’ichi Ueda, Iichiro Uesugi, Takeshi Yamada, and other participants in the workshops at Australian National University, JFC, RIETI and Waseda University and those in sessions at the 9th Regional Finance Conference at Kansai Gaidai University, Osaka, and the Nippon Finance Association 2016 meeting at Yokohama, and the 29th Australasian Finance and Banking Conference, Sydney, Australia. I am fully responsible for all possible remaining errors in this paper.
Publisher Copyright:
© 2018 Elsevier B.V.
PY - 2018/4
Y1 - 2018/4
N2 - We present evidence that government-controlled banks (GCBs) significantly increased their lending to small and medium-sized enterprises (SMEs) whose main bank was a large bank in the 2008–09 financial crisis. Further analyses show that the weak relationship between large banks and SMEs is a major cause for this phenomenon. The mixed Cournot oligopoly model with relationship banking, where profit-maximizing private banks and a welfare-maximizing GCB coexist, shows that this finding is consistent with the welfare maximization by a GCB rather than its own profit maximization.
AB - We present evidence that government-controlled banks (GCBs) significantly increased their lending to small and medium-sized enterprises (SMEs) whose main bank was a large bank in the 2008–09 financial crisis. Further analyses show that the weak relationship between large banks and SMEs is a major cause for this phenomenon. The mixed Cournot oligopoly model with relationship banking, where profit-maximizing private banks and a welfare-maximizing GCB coexist, shows that this finding is consistent with the welfare maximization by a GCB rather than its own profit maximization.
KW - Government-controlled banks
KW - Mixed oligopoly
KW - Relationship banking
KW - Small business financing
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U2 - 10.1016/j.jbankfin.2018.01.015
DO - 10.1016/j.jbankfin.2018.01.015
M3 - Article
AN - SCOPUS:85044635009
SN - 0378-4266
VL - 89
SP - 78
EP - 93
JO - Journal of Banking and Finance
JF - Journal of Banking and Finance
ER -