Abstract
Japan’s regional banks are under pressure to consolidate amid low interest rates and a shrinking population. This paper explores the effect of bank consolidation on the efficiency and profitability of Japanese regional banks using panel data over the period 2004-2018. As for banks owned by bank holding companies, we find that a decrease in overhead ratio (OHR) and an increase in return on assets (ROA) are observed after consolidation, while for post-merger banks, we find that an increase in OHR is observed before the merger and no clear benefit is obtained from bank mergers. These findings suggest that mergers are not the only way to improve the operating performance of regional banks.
