Capital injection,restructuring targets and personnel management: The case of Japanese regional banks |
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Authors: | Kazuki Onji David Vera Jenny Corbett |
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Institution: | 1. Australia-Japan Research Centre, Crawford School of Public Policy, Australian National University, Australia;2. Department of Economics, California State University, Fresno, United States |
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Abstract: | A case study of the Japanese bank recapitalization by Hoshi and Kashyap (2005) identified a bank that overstated the progress of required personnel downsizing by shifting employees to subsidiaries. This paper asks if the recapitalization program had a design flaw. We focus on regional banks with a unique panel dataset of 81 banking groups that allows us to observe the employment levels of subsidiaries, in addition to those of parent banks, over fiscal 1994–2006. We estimate a labor-demand equation with sluggish adjustment to compare the employment patterns of public capital recipients and other banks. The result indicates that the shuffling of personnel to subsidiaries was a common response among banks that received large capital injections. Our finding highlights a tension between a reconstruction program and labor law when a country has a tight law on dismissal. |
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