| Abstract: | In this paper we study the stability of the Japanese banking system in the prewar period. First, we review the development of the Japanese banking system from the Meiji Restoration until the Second World War. It will be shown that government policy toward the banking industry changed drastically after the 1927 banking panic. Second, we examine the causes of bank closings in 1927. We test whether or not such bank closings were due to their unsound management, which was reflected in the structure of assets and liabilities and bank performance, using a qualitative model. Our empirical results conclude that bank closings occurred more for banks with unsound management and inefficient operations. J. Japan. Int. Econ., December 1993, 7(4), pp. 387–407. School of Political Science and Economics, Waseda University, 6-1 Nishiwaseda 1-chome, Shinjuku-ku, Tokyo 160, Japan; and University of Tokyo, Hongo, Bunkyo-ku, Tokyo, Japan. |
