Does a large loss of bank capital cause Evergreening? Evidence from Japan

Research output: Contribution to journalArticle

15 Citations (Scopus)

Abstract

Using the real estate lending share of the bank's loan portfolio at the peak of the land-price bubble as an instrument for bank capital, we identify the impact of capital adequacy on the allocation of bank lending under the Basel regulatory framework. We find that, in Japan, a large loss of bank capital caused by the regulator's excessively tough stance towards banks not only induced the contraction of the bank lending supply but also the banks' reallocation of their lending portfolios to financially unhealthy industries with a higher concentration of non-performing loans.

Original languageEnglish
Pages (from-to)116-136
Number of pages21
JournalJournal of the Japanese and International Economies
Volume24
Issue number1
DOIs
Publication statusPublished - 2010 Mar

Fingerprint

bank
Japan
cause
lending
evidence
loan
real estate
Bank lending
Lending
Bank capital
supply
industry
Contraction
Loan portfolio
Capital adequacy
Real estate
Price bubbles
Non-performing loans
Bank loans
Reallocation

Keywords

  • Bank capital
  • Evergreening
  • Instrumental variable
  • Real estate lending

ASJC Scopus subject areas

  • Economics and Econometrics
  • Finance
  • Political Science and International Relations

Cite this

Does a large loss of bank capital cause Evergreening? Evidence from Japan. / Watanabe, Wako.

In: Journal of the Japanese and International Economies, Vol. 24, No. 1, 03.2010, p. 116-136.

Research output: Contribution to journalArticle

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