Japanese Banks' Mergers and Acquisitions: Competitive Advantage & Organizational Recovery through Strategic Relatedness and Resource Orientation

<p>In late 1990s, diversification was the name of the game for the Japanese banking sector. The problem in the Japanese financial system started on December, 29, 1998 with the burst of the bubble economy which resulted in Yen 75 trillion of non-performing loans among the financial sector. Simultaneously, Japanese policy makers as well as the banking institutions launched a massive restructuring, risutora drive. This study, exploratory and descriptive in nature is based on eight interviews conducted in Japan on the five Japanese mega-bank M&As. The motivations, strategic fit and resources that play a critical role towards providing a competitive advantage and organizational recovery for the Japanese mega-bank engaging in the M&A activity are presented in case study style, with a multi-cross case analysis. A conceptual model was derived from the literature, tested through this research and adapted in light of the Japanese bank M&A strategies. The results suggest that the Japanese mega-bank M&As act as a source of influencing a competitive advantage but also in tandem act as a support mechanism in 'pulling' the Japanese banking sector out of the crisis mode and thereby providing financial recovery to the system as a whole. The ranking in terms of deriving a competitive advantage among the banks is placed in the following order Bank 1, Bank 2, Bank 3, Bank 4 and Bank 5. More specifically, the competitive advantage can be derived in terms of complementarily relatedness among the combining bank strategic assets; i) markets, ii) products and services; and iii) resource traits, organizational resources including leadership style and corporate culture; and physical traits such as IT systems integration, which rose in terms of cutting costs by reducing unwanted resources. Simply put the integration level, strategic relatedness and the types of resources are classified as strategic inputs and the benefits acquired for a competitive advantage and organizational recovery are defined as strategic outputs. Secondly, the study maintains that with the change in traditional Japanese banking practises, the era of 2000 is defined by diversification i.e. M&A strategy adopted by Japanese banks in terms of strategic fit, and types of resource but also where the resources are derived from. In other words, the source of the resources where the resources are derived from i.e. combining, new and their uniqueness also acts as an imperative indicator for Japanese mega-bank M&As. Resources prominent among the Japanese mega-banks are i) keiretsu (client resources); ii) organizational (management and leadership; knowledge; culture; and human resources); iii) physical (IT systems; branch networks and other real estate assets); iv) strategic (markets and products and services) and v) financial (capital markets and cross-shareholding patterns among keiretsu and main bank affiliates). Thirdly, these banks display a unique quality - the 'dual role' that strategic relatedness traits not only act as a combination potential but also act as resources and vice versa. The motivations include government de-regulation; non-performing loans of banks; over-crowding in the banking industry; and size competitiveness and diversification; via capturing markets, increase in profitability; and aligning with the changing needs of the Japanese clients. The research also aims to bridge the gaps in Japanese banking literature by building our understanding on how the Japanese banking sector has distanced itself from the traditional banking culture since the de-regulation wave instigated in Japan in mid to late 1990s. While there has been change in terms of financial cross-shareholdings, the traditional ties in terms of sharing strategic resources continues, introducing out-side directors, breaking away gradually from the amakudari systems and the long term employment and seniority based-wage system. The Japanese banking sector learnt from its mistakes and therefore, has not only been able to escape from the sluggish international banking environment of late but has also been able to diversify into cross-border investments and act as a learning source for the global financial institutions which has been in a state of perils since 2008, on the helms of sub-prime losses and failure of major investment banks.</p>

Japanese Banks' Mergers and Acquisitions: Competitive Advantage & Organizational Recovery through Strategic Relatedness and Resource Orientation

<p>In late 1990s, diversification was the name of the game for the Japanese banking sector. The problem in the Japanese financial system started on December, 29, 1998 with the burst of the bubble economy which resulted in Yen 75 trillion of non-performing loans among the financial sector. Simultaneously, Japanese policy makers as well as the banking institutions launched a massive restructuring, risutora drive. This study, exploratory and descriptive in nature is based on eight interviews conducted in Japan on the five Japanese mega-bank M&As. The motivations, strategic fit and resources that play a critical role towards providing a competitive advantage and organizational recovery for the Japanese mega-bank engaging in the M&A activity are presented in case study style, with a multi-cross case analysis. A conceptual model was derived from the literature, tested through this research and adapted in light of the Japanese bank M&A strategies. The results suggest that the Japanese mega-bank M&As act as a source of influencing a competitive advantage but also in tandem act as a support mechanism in 'pulling' the Japanese banking sector out of the crisis mode and thereby providing financial recovery to the system as a whole. The ranking in terms of deriving a competitive advantage among the banks is placed in the following order Bank 1, Bank 2, Bank 3, Bank 4 and Bank 5. More specifically, the competitive advantage can be derived in terms of complementarily relatedness among the combining bank strategic assets; i) markets, ii) products and services; and iii) resource traits, organizational resources including leadership style and corporate culture; and physical traits such as IT systems integration, which rose in terms of cutting costs by reducing unwanted resources. Simply put the integration level, strategic relatedness and the types of resources are classified as strategic inputs and the benefits acquired for a competitive advantage and organizational recovery are defined as strategic outputs. Secondly, the study maintains that with the change in traditional Japanese banking practises, the era of 2000 is defined by diversification i.e. M&A strategy adopted by Japanese banks in terms of strategic fit, and types of resource but also where the resources are derived from. In other words, the source of the resources where the resources are derived from i.e. combining, new and their uniqueness also acts as an imperative indicator for Japanese mega-bank M&As. Resources prominent among the Japanese mega-banks are i) keiretsu (client resources); ii) organizational (management and leadership; knowledge; culture; and human resources); iii) physical (IT systems; branch networks and other real estate assets); iv) strategic (markets and products and services) and v) financial (capital markets and cross-shareholding patterns among keiretsu and main bank affiliates). Thirdly, these banks display a unique quality - the 'dual role' that strategic relatedness traits not only act as a combination potential but also act as resources and vice versa. The motivations include government de-regulation; non-performing loans of banks; over-crowding in the banking industry; and size competitiveness and diversification; via capturing markets, increase in profitability; and aligning with the changing needs of the Japanese clients. The research also aims to bridge the gaps in Japanese banking literature by building our understanding on how the Japanese banking sector has distanced itself from the traditional banking culture since the de-regulation wave instigated in Japan in mid to late 1990s. While there has been change in terms of financial cross-shareholdings, the traditional ties in terms of sharing strategic resources continues, introducing out-side directors, breaking away gradually from the amakudari systems and the long term employment and seniority based-wage system. The Japanese banking sector learnt from its mistakes and therefore, has not only been able to escape from the sluggish international banking environment of late but has also been able to diversify into cross-border investments and act as a learning source for the global financial institutions which has been in a state of perils since 2008, on the helms of sub-prime losses and failure of major investment banks.</p>

Contribution of the Banking Sector for Economic Growth, Case of Ethiopian Banks

Financial institutions, especially the banking sector plays a crucial role in models of economic growth. It is an essential component of investments; bank Profit/Loss, banks deposits, banks advances and Interest Earning have considerable effect on economic activity and long-term economic growth. The view that, strong financial sector performance has the key to economic growth was reflected in the development strategies and plans in many countries. In Ethiopia, the development of the financial sector is limited, the contribution to GDP is also very low, and most of the banks attention to is on similar services and commercial activities in the domestic banking areas rather than diversified and international banking services. After selection of the study variables the researchers were described the economic growth function of the nation using the GDP Model to show the contribution of deposits, investments, advances, profitability and interest earning on GDP. This study is important to the practitioners, policy makers, and potential researchers by providing recommendable solutions those mitigate the obstacles in banking sector and providing conducive financial and economic theories and models important for the banking institutions and other concerned parties. The general objective of this study is to evaluate the contribution of the banking sector for the growth of GDP of the nation, more specifically it evaluate or measure the contribution of deposits, investments, advances, profitability, and interest earning on GDP of the nation. The appropriate research design adopted for this study was descriptive. From the total of 19 private and public banks in Ethiopia 5 banks were purposely selected (1 public and 4 private) for this study. Secondary sources of data were used for the analysis. All secondary data were collected from the different official publications of respected banks, annual reports and National bank of Ethiopia for five years (2009-2013 GC). The collected data were analyzed with the use of the SPSS (statistical package for the social sciences) program 20v. The percentage, mean, standard deviation, coefficient of variation, correlation and multiple regressions were utilized. The finding shows that Deposit, Investment, Advances, profitability, and Interest earned by Banks have significant effect on the GDP growth of the Nation. The percentage share to GDP in the sector was increased from time to time with an average of 22%, 11%, 18%, 0.86%, and 1.2% respectively.

The Power of Delay: Banking System Structure and Implementation of the Basel Accords

Recent developments in the international banking system, especially the 2007–9 crisis and subsequent wave of postcrisis regulation, have drawn increasing attention to the structural power of banks and banking systems. States need a functioning financial system to ensure the overall health of their economies, so states must shape policy to protect their financial firms. National financial systems may be dominated either by banks or by capital markets. In states where banks dominate provision of capital, states must shape policy to protect their banks because of their structural importance, independent of any lobbying or other direct action on the part of banks to exercise instrumental power. The entangling of structural and instrumental power means studying differences in structural power requires either careful case-study work or cross-national comparison of responses to a common shock. The implementation of the 2011 Basel III Accords provides just such an opportunity. This article offers a quantitative analysis of a new dataset of implementation of Basel III components in the Basel Committee on Banking Stability member states from 2011 to 2019 and demonstrates the structural power of banks in bank-based systems to accelerate implementation of favorable policies and slow implementation of unfavorable ones.

International banking and financial fragility: the role of regulation in Brazil and Mexico, 1967–1982

The shortcomings and potential dangers of international financial flows for the health and stability of domestic banking systems in developing countries have been copiously discussed over the last decades. While the importance of capital controls and regulation as determining factors has been widely emphasised, the extent to which these policies work in episodes of financial crisis is still a matter of debate. This article examines the relationship between supervisory frameworks and banking fragility in Mexico and Brazil in the wake of the international debt crisis of 1982. It shows that the model of international banking intermediation that evolved out of the stringent capital mobility system in Brazil was considerably less vulnerable to crisis than in Mexico, which had a more lightly regulated regime. These findings provide insights into historical debates about the implications of prudential regulation and capital controls for the development and expansion of foreign finance, and whether the risks underlying international banking are necessarily inherent in the process of financial globalisation.