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Performance of agricultural cooperative banks in Japan

Performance of agricultural cooperative banks in Japan The purpose of this paper is to investigate the efficiency of the banking business of Japan’s agricultural cooperatives (JAs), which depend heavily on financial business with non-farmers, contradictory to cooperative principles.Design/methodology/approachThe authors construct a panel data set over 2005–2016 from the financial statements of JAs’ prefectural-level federations and use the input distance stochastic frontier model with a time-variant inefficiency effect for analysis. Both the flow and stock measures of the banking output are used in identical models and the efficiency results are compared. The authors also investigate the determinants of efficiency by using the Tobit and ordinary least squares regression models.FindingsThere is strong evidence of significant prefectural differences in efficiency values. The ratio of lending to non-members to total loans is positively related to efficiency. In contrast, the higher reliance on a central organization and credit business leads to lower efficiency.Research limitations/implicationsApart from banking, JAs provide mutual insurance business services. As the authors investigate only the efficiency of JAs’ banking business in this study, it would be necessary to investigate the efficiency of their insurance business as well when evaluating JAs’ overall financial business.Originality/valueThere are few studies that investigate the efficiency of JAs’ banking business and its determinants, although significant attention has been paid to their excessive dependence on the financial business. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Agricultural Finance Review Emerald Publishing

Performance of agricultural cooperative banks in Japan

Agricultural Finance Review , Volume 80 (1): 13 – Jan 7, 2020

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Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
0002-1466
DOI
10.1108/afr-03-2019-0036
Publisher site
See Article on Publisher Site

Abstract

The purpose of this paper is to investigate the efficiency of the banking business of Japan’s agricultural cooperatives (JAs), which depend heavily on financial business with non-farmers, contradictory to cooperative principles.Design/methodology/approachThe authors construct a panel data set over 2005–2016 from the financial statements of JAs’ prefectural-level federations and use the input distance stochastic frontier model with a time-variant inefficiency effect for analysis. Both the flow and stock measures of the banking output are used in identical models and the efficiency results are compared. The authors also investigate the determinants of efficiency by using the Tobit and ordinary least squares regression models.FindingsThere is strong evidence of significant prefectural differences in efficiency values. The ratio of lending to non-members to total loans is positively related to efficiency. In contrast, the higher reliance on a central organization and credit business leads to lower efficiency.Research limitations/implicationsApart from banking, JAs provide mutual insurance business services. As the authors investigate only the efficiency of JAs’ banking business in this study, it would be necessary to investigate the efficiency of their insurance business as well when evaluating JAs’ overall financial business.Originality/valueThere are few studies that investigate the efficiency of JAs’ banking business and its determinants, although significant attention has been paid to their excessive dependence on the financial business.

Journal

Agricultural Finance ReviewEmerald Publishing

Published: Jan 7, 2020

Keywords: Japan; Agricultural cooperatives

References