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Were regulatory interventions effective in lowering systemic risk during the financial crisis in Japan?

Katsutoshi Shimizu, Kim Cuong Ly, Kim Cuong Ly Orcid Logo

Journal of Multinational Financial Management, Volume: 41, Pages: 80 - 91

Swansea University Author: Kim Cuong Ly Orcid Logo

Abstract

This study investigates the effectiveness of various regulatory interventions on systemic risk during the financial crisis in Japan. Our evidence generally shows that the regulatory interventions worked effectively through the liquidity provision. That is, the public fund injection programs, the pro...

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Published in: Journal of Multinational Financial Management
ISSN: 1042444X
Published: 2017
Online Access: Check full text

URI: https://cronfa.swan.ac.uk/Record/cronfa34600
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Abstract: This study investigates the effectiveness of various regulatory interventions on systemic risk during the financial crisis in Japan. Our evidence generally shows that the regulatory interventions worked effectively through the liquidity provision. That is, the public fund injection programs, the prompt corrective actions, and the blanket guarantee reduced systemic risk. The simple government intervention package to bail out distressed “too-big-to-fail” banks stabilized the banking system via the external channel whereas the massive bailout scheme suffered the “too-many-to-fail” problem in the sense that it increased systemic risk through both direct spillover and external channels. This study suggests that the effective government intervention should be restricted to a limited number of bailouts to reduce systemic risk.
Keywords: financial crisis, systemic risk, deposit insurance, public fund injection, bank failure
College: Faculty of Humanities and Social Sciences
Start Page: 80
End Page: 91