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The technical efficiency of the Japanese banks: Non-radial directional performance measurement with undesirable output |
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| Authors: | Carlos Pestana Barros Shunsuke Managi Roman Matousek |
| Institution: | a Instituto Superior de Economia e Gestão, UECE (Research Unit on Complexity and Economics), Technical University of Lisbon, Rua Miguel Lupi, 20, 1249-078 Lisbon, Portugal b Graduate School of Environmental Studies, Tohoku University, 6-6-20 Aramaki-Aza Aoba, Aoba-Ku, Sendai 980-8579, Japan c Centre for EMEA Banking, Finance and Economics, London Metropolitan Business School, London Metropolitan University, 84 Moorgate, EC2M 6SQ London, UK |
| Abstract: | The paper analyses technical efficiency of the Japanese banks from 2000 to 2007. The estimation technique is based on the Russell directional distance function that takes into consideration not only desirable outputs but also an undesirable output that is represented by non-performing loans (NPLs). The results indicate that NPLs remain a significant burden as for banks' performance. We show that banks' inputs have to be utilised more efficiently, particularly labour and premises. We also argue that a further restructuring process is needed in the segment of Regional Banks. We conclude that the Japanese banking system is still far away from being fully consolidated and restructured. |
| Keywords: | DEA Japan Banks Non-performing loans |
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