This paper applies the Weight Assurance Region (WAR) model in order to examine the multi-period efficiency of Japanese banks. The network framework allows deposits to be treated as an intermediate variable and as a result it provides a solution to the deposits dilemma. We utilize the WAR model and its ability to incorporate prior information into the analysis. We extend the model from efficiency to productivity analysis and by applying a parallel network structure we construct a common-weight global Malmquist productivity index. Furthermore, we incorporate non-performing loans into to our analysis by modifying the traditional relational network model. In order to do so, we assume that the existence of good and bad loans are not necessary for each other. Although (total) loans are needed to be generated in order for bad loans to exist, bad loans are not necessary to be produced as a byproduct of good loans. Therefore, we assume that good and bad loans are not null-joint. The incorporation of both good and bad loans into the analysis provides a more accurate representation of the banking system and offers a richer level of information to the decision makers. There is a large dispersion of inefficiency levels in Japanese banking system. In addition, the results reveal that the Global Financial Crisis and the Great East Japan Earthquake affected Japanese banks by slowing their productivity growth.
|Publication status||Published - 2018|
|Event||British Accounting and Finance Association (BAFA) Scottish Area Group Annual Conference 2018 - University of Dundee School of Business, Dundee, United Kingdom|
Duration: 22 Aug 2018 → 22 Aug 2018
|Conference||British Accounting and Finance Association (BAFA) Scottish Area Group Annual Conference 2018|
|Period||22/08/18 → 22/08/18|