Research on the mutual financial institutions: comparative study

Minegishi, Shinya (2010) Research on the mutual financial institutions: comparative study. Doctoral thesis, London Metropolitan University.


The purpose of this thesis is to examine the feature of mutual financial institutions, specifically comparing Japanese financial institutions, commercial banks and mutual institutions (credit associations and credit cooperatives). In addition the thesis discusses whether there are any differences between the bank-based (Japan) and market-based (United States) financial systems. The sample periods are from 1999 (2001) to 2005 or from 2001 to 2007.
Although the important economic role played by mutual financial institutions is widely recognized, researchers have paid them little attention due to the small size and impact of their customers in the whole economy. Nevertheless this research focuses on the importance of small and medium-sized finns' financial industry in the economy, approaching the issues from a variety of perspectives.
There is not a great deal of existing literature that examines financial institutions in several different countries over the same period. In fact this is the first systematic piece of research to analyze the differences between mutual financial institutions depending on the economic conditions prevailing in the countries in which they are based.
The datasets in this dissertation on Japanese mutual financial institutions and commercial banks are taken from financial statements for each institution (1999-2005) and from the Japanese Bankers Association (2000-2007) respectively. This is the period in which the reforms implemented after the bursting of the Japanese economic bubble were mostly completed. It is useful to consider the economic recovery process. As for the US financial institutions, the datasets are taken from Bankscope database.
At the empirical level the following models are supplied: for market structure ((a) SCP and efficiency hypothesis and (b) Panzar-Rosse H statistics) and for cost structure ((c) cost efficiency and (d) economies of scale). A key distinguishing feature of this paper is its discussion of two features, the market and cost structure, regarding commercial banks and mutual financial institutions.
Our empirical results showed that the market structure of mutual financial institutions in Japan and the US exhibit different features, depending on the economic conditions. In fact, Japanese mutual financial institutions supported the efficiency hypothesis, but those in the US followed the SCP hypothesis. However, in both countries, the competitiveness of mutual institutions was lower than that of commercial banks. As for cost structure, there were similarities between Japanese and the US mutual institutions. It is probably the case that this result derives from the organizational characteristics of mutual institutions. Nevertheless, this does not mean all mutual financial institutions would converge upon a similar cost structure. This thesis will propose that the institutions in question need to satisfy certain conditions such as the size of institution and the range of customers.

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