The governance structures of Japanese credit associations and their objective functions

Although Japanese credit associations are non-profit cooperative financial institutions, they assume 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, the governance structures of credit associations tend to exhibit weaker discipline than those of regional banks, and, for this reason, the financial performances of credit associations and regional banks might differ. In this article, we empirically investigated whether the objective functions of credit associations are different from those of regional banks considering their different governance structures. As a result, although significant differences of profitability of these two types of institutions were not detected, it was demonstrated that credit associations can capture a greater 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.