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Performance of agricultural cooperative banks in Japan: Difference between stock and flow output variables

Kozo Harimaya (College of Business Administration, Ritsumeikan University, Kyoto, Japan)
Koichi Kagitani (Kobe City University of Foreign Studies, Kobe, Japan)

Agricultural Finance Review

ISSN: 0002-1466

Article publication date: 16 October 2019

Issue publication date: 7 January 2020

Abstract

Purpose

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/approach

The 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.

Findings

There 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/implications

Apart 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/value

There 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.

Keywords

Acknowledgements

The authors would like to thank the editor and the two anonymous reviewers for their suggestions and comments that greatly contributed to improving the final version of the paper. The authors are grateful for the financial support provided by a Grant-in-Aid for Scientific Research from the Japan Society for the Promotion of Science, Grant No. 16K0638.

Citation

Harimaya, K. and Kagitani, K. (2020), "Performance of agricultural cooperative banks in Japan: Difference between stock and flow output variables", Agricultural Finance Review, Vol. 80 No. 1, pp. 38-50. https://doi.org/10.1108/AFR-03-2019-0036

Publisher

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Emerald Publishing Limited

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