COLLUSION VERSUS EFFICIENCY IN THE JAPANESE REGIONAL BANKING INDUSTRY

Abstract

This paper uses a behavioural approach to test the hypothesis that Japan's regional bank ingperformance is primarily the result of efficiency and is best described by the efficient structure hypothesis as opposed to the structure-conduct-performance hypothesis. Our model allows us for the first time to estimate the degree of (implicit) collusion in the Japa neseregional banking industry. This paper finds that significant collusion does occur. This result leads us to conclude that the structure-conduct-performance hypothesis better explains Japan's regional banking performance.