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Will the U.S. Bank Recapitalization Succeed? Lessons from Japan
Takeo HoshiAnil K Kashyap
Jacquemin seminar European CommissionJune 18, 2009
1
Outline
2
1. Similarities between the U.S. and Japan 1997-1999 in Japan = Fall 2008-2009 in the U.S.
2. Lessons from the Japanese asset purchase and capital injection experience
3. Analysis of bank capital rebuilding in Japan
Contributions
3
1. Concise overview of the Japanese experience
2. Some new analysis, especially on what finally ended the capital shortage in Japan and the adverse effects of directed credit
3. Highlight a number of policies experimented with in the U.S. that failed in Japan
4
1998Q1
1998Q4
1999Q3
2000Q2
2001Q1
2001Q4
2002Q3
2003Q2
2004Q1
2004Q4
2005Q3
2006Q2
2007Q1
2007Q4
2008Q3
2009Q2
2010Q1
2010Q4
2011Q3
2012Q2
2013Q1
2013Q4
2014Q3
2015Q2
2016Q1
2016Q4
2017Q3
2018Q2
2019Q1
2019Q4
2020Q3
2021Q2
2022Q1
1998Q1
1999Q2
2000Q3
2001Q4
2003Q1
2004Q2
2005Q3
2006Q4
2008Q1
2009Q2
2010Q3
2011Q4
2013Q1
2014Q2
2015Q3
2016Q4
2018Q1
2019Q2
2020Q3
2021Q4
0.00
20.00
40.00
60.00
80.00
100.00
120.00
140.00
160.00
180.00
200.00
0.0
20.0
40.0
60.0
80.0
100.0
120.0
Land Prices in the U.S. and Japan
US (left, bottom axes) Japan (right, top axes)
Case-Shiller National Index
Commercial Prices 6 Major Cities
Mar. 2008 to Feb. 2009 in the U.S.• Unexpected failure of large institutions (Mar and Sep 2008)• Spike in the interbank borrowing rate, sharp rise in the cost of
insuring debts, frozen capital markets• Call for suspending mark-to-market accounting, restriction on
short sales (Sep 2008)• Original TARP (Oct 3, 2008)• Capital Purchase Program (Oct 14, 2008)• Republicans lost big, new President chosen (Nov 2008)• 2nd capital injections to Citigroup, Bank of America• Freefall of bank stock prices• Geithner Plan (From Feb 2009): Stress tests, capital assistance,
PPIP, expansion of TALF
5
Nov. 1997 to Mar. 1999 in Japan(Chapter 8 of Hoshi and Kashyap 2001)
• Unexpected failure of large institutions (Nov 1997)• Spike in the interbank borrowing rate• New accounting to cover up problems (Jan 1998)• Half-hearted recapitalization (Mar 1998)
– All banks get the same injection = amount desired by the strongest bank
• LDP loses election, government resigns (June 1998)• Second round crisis legislation (Oct 1998)• Several major financial firms nationalized (Nov 1998)• Second round recapitalization (Mar 1999)
– MOF official declares crisis “will be over in 2 weeks” (Feb 1999)
6
7
Chronology of Japanese experience
1. Late 1997-early 1999: classic credit crunch
2. 1999 to 2003: bank capital shortage and raging zombie problem
3. 2003 to 2007: bank capital rebuilding and economic recovery
1/1995
4/1995
7/1995
10/1995
1/1996
4/1996
7/1996
10/1996
1/1997
4/1997
7/1997
10/1997
1/1998
4/1998
7/1998
10/1998
1/1999
4/1999
7/1999
10/1999
-20
0
20
40
60
80
100
120
Japan Premium: 1995-1999 (bp)
8
9
1998 Capital Injections
Preferred Shares Subordinated loans/debts
S&P Rating
Total Funds
Type Amount dividend rate
Conversionstart
Forced conversion
Type Amount yield for 5 years
yield after 6th year
City banksDai-ichi Kangyo BBB+ 99 CPS 99 0.75 7/1/1998 8/1/2005Fuji BBB+ 100 SDP 100 L+1.10 L+2.60Sakura BBB 100 SDP 100 L+1.20 L+2.70Sanwa A- 100 SD10 100 L+0.55 L+1.25Sumitomo A- 100 SDP 100 L+0.90 L+2.40Tokyo Mitsubishi A 100 SDP 100 L+0.90 L+2.40Asahi BBB+ 100 SLP 100 L+1.00 L+2.50Daiwa BBB- 100 SLP 100 L+2.70 L+2.70Tokai BBB+ 100 SDP 100 L+0.90 L+2.40Long-term Credit bankInd. Bank of Japan A- 100 SD10 100 L+0.55 L+1.25LTCB BBB- 177.6 CPS 130 1.00 10/1/1998 4/1/2008 SLP 46.6 L+2.45 L+3.95Nippon Credit Bank NR 60 CPS 60 1.00 10/1/1998 4/1/2018Trust banksMitsubishi Trust A- 50 SDP 50 L+1.10 L+2.60Sumitomo Trust A- 100 SDP 100 L+1.10 L+2.60Mitsui Trust BBB+ 100 SDP 100 L+1.45 L+2.95Chuo Trust NR 60 CPS 32 2.50 7/1/1998 8/1/2018 SLP 28 L+2.45 L+3.95Toyo Trust NR 50 SDP 50 L+1.10 L+2.60Regional BankBank of Yokohama BBB 20 SLP 20 L+1.10 L+2.60Hokuriku Bank NR 20 SLP 20 L+2.45 L+3.95Ashikaga Bank NR 30 SDP 30 L+2.95 L+4.45
1997/98 Capital Shortage and Credit Crunch in Japan
• BoJ minutes
• Tankan survey data
• Mix between CP and bank lending
• Regression evidence
10
Bank of Japan January 1998 minutes:
“Members noted that the current phase of the economy featured (1) a substantial decline in private consumption, ……; (2) a significant deterioration of confidence in the economic outlook ……, leading to amplified concern about the economy; and (3) a vicious circle created by interaction between the real economy and financial activity ……” The minutes go on to report that “the prospects for a more restrictive lending attitude of financial institutions and its possible effects were discussed in detail.” (emphasis in the original).
11
FOMC Oct 29, 2008 meeting: “[FOMC] Participants were concerned that the negative spiral in which financial strains lead to weaker spending, which in turn leads to higher loan losses and a further deterioration in financial conditions, could persist for a while longer.”
12
Accommodative ↑
Tight↓
13
14
March 1999 injections Preferred shares Subordinated debt/loansS&P
RatingTotal Type Amt div.
rateConversionstart date
Forced conversion
Type Amt yield after step-up
step-up date
Dai-ichi Kangyo BBB 900 CPS 200 0.41 8/1/2004 8/1/2006 SD10 100 L+0.75 L+1.25 4/1/2004CPS 200 0.70 8/1/2005 8/1/2008 SD11 100 L+0.75 L+1.25 4/1/2005NCPS 300 2.38
Fuji BBB+ 1,000 CPS 250 0.40 10/1/2004 2/1/2009 SDP 200 L+0.65 L+1.35 L+2.15
4/1/20044/1/2009
CPS 250 0.55 10/1/2006 2/1/2011NCPS 300 2.10
Sakura BBB 800 CPS 800 1.37 10/1/2002 10/1/2009Sanwa BBB+ 700 CPS 600 0.53 7/1/2001 8/1/2008 SDP 100 L+0.34 L+1.34 10/1/2004Sumitomo BBB+ 501 CPS 201 0.35 5/1/2002 2/27/2009
CPS 300 0.95 8/1/2005 2/27/2009Asahi BBB+ 500 CPS 300 1.15 7/1/2002 12/1/2009 SLP 100 L+1.04 L+2.54 4/1/2009
CPS 100 1.48 7/1/2003 12/1/2014Daiwa BB+ 408 CPS 408 1.06 6/30/1999 4/1/2009Tokai BBB- 600 CPS 300 0.93 7/1/2002 3/31/2009
CPS 300 0.97 7/1/2003 3/31/2009Industrial Bank of Japan
BBB+ 600 CPS 175 0.43 7/1/2003 9/1/2009 SDP 250 L+0.98 L+1.48 4/1/2004CPS 175 1.40 9/1/2003 9/1/2009
Mitsubishi Trust BBB 300 CPS 200 0.81 7/31/2003 8/1/2008 SDP 100 L+1.75 L+2.25 4/1/2004Sumitomo Trust BBB 200 CPS 100 0.76 4/1/2001 3/31/2009 SD12 100 L+1.53 L+2.03 4/1/2006Mitsui Trust BBB- 400 CPS 250.3 1.25 7/1/1999 8/1/2009 SLP 150 L+1.49 L+1.99 3/31/2004Chuo Trust NR 150 CPS 150 0.90 7/1/1999 8/1/2009Toyo Trust NR 200 CPS 200 1.15 7/1/1999 8/1/2009Bank of Yokohama BBB 200 CPS 70 1.13 8/1/2001 7/31/2009 SDP 50 L+1.65 L+2.15 4/1/2004
CPS 30 1.89 8/1/2004 7/31/2009 SL10 50 L+1.07 L+1.57 4/1/2004
Cross-section regression of new loan growth on capital ratio
15
Year Reported capital ratio Adjusted capital ratio
1995 .0047 (.0055) .0010 (.0026)
1996 .0148 (.0070) ** .0104 (.0045) **
1997 .0023 (.0038) .0026 (.0025)
1998 .0168 (.0039) *** .0156 (.0028) ***
1999 .0073 (.0053) .0119 (.0030) ***
2000 .0201 (.0080) ** .0177 (.0074) **
2001 .0014 (.0013) .0011 (.0012)
2002 .0007 (.0036) .0034 (.0019) *
2003 -.0046 (.0046) -.0042 (.0042)
2004 -.0028 (.0040) -.0027 (.0039)
2005 -.0022 (.0033) -.0017 (.0030)
16
Non-Performing Loans (Risk Management Loans): 1996-2008 (100 million yen)
How big was the problem in Japan? (All banks, ¥ billion)
17
End of Loan Losses Cumulative Loan Losses since 4/1992
Number of Major Banks
3/1994 3.872 5.512 21
3/1995 5.232 10.744 21
3/1996 13.369 24.113 20
3/1997 7.763 31.877 20
3/1998 13.258 45.135 20
3/1999 13.631 58.766 17
3/2000 6.944 65.710 18
3/2001 6.108 71.818 18
3/2002 9.722 81.540 15
3/2003 6.658 88.198 13
3/2004 5.374 93.572 13
3/2005 2.848 96.420 13
3/2006 0.363 96.783 11
3/2007 1.046 97.829 11
3/2008 1.124 98.953 11
≈19% of GDP
Economic fallout post-1998
• Banks gambling for reclamation through rolling over loans– Government pressure to lend especially to SMEs
• Zombie firms continuing receive credit
• Productivity slowdown in zombie infested sectors
18
19
Independent variable
Year Lag 1 Lag 4 Year Lag1 Lag4
Real estate loan 1998.348
(.083).312
(.065)2002
.242(.079)
.213(.069)
SMC loan.038
(.026).027
(.021).111
(.024).062
(.032)
Real estate loan 1999.653
(.174).684
(.165)2003
.141(.056)
.134(.059)
SMC loan-.021(.041)
-.051(.053)
.108(.018)
.083(.019)
Real estate loan 20001.534(.573)
1.132(.553)
2004.009
(.044).045
(.048)
SMC loan-.082(.114)
-.029(.108)
.101(.014)
.097(.017)
Real estate loan 2001.430
(.164).388
(.233)2005
.006(.054)
-.039(.054)
SMC loan.201
(.083).075
(.041).066
(.017).085
(.018)
Cross-section regression of NPL ratio
20
Year Lag 1 Lag 2 Lag3 Lag4
2001 -.1070(.0521)
-.0437(.0260)
-.0452(.0256)
-.0465(.0264)
2002 -.0213(.0240)
-.0128(.0218)
-.0079(.0130)
-.0107(.0142)
2003 -.0085(.0052)
-.0072(.0056)
-.0049(.0058)
-.0038(.0054)
2004 -.0158(.0054)
-.0142(.0043)
-.0083(.0034)
-.0126(.0054)
2005 -.0107(.0044)
-.0115(.0037)
-.0113(.0036)
-.0067(.0033)
Cross-section regression of bank profit rate on SME loans
21
70
80
90
100
110
120
80 82 84 86 88 90 92 94 96 98 00 02 04
MANUFACTURING NONMANUFACTURING
Total Factor Productivity by Industry: 1980-2002 (1995=100)
Overview of the Responses
Strategies adopted1. Asset management companies
2. Liquidation of Jusen
3. Protection of bank liabilities
4. Capital injections
5. Temporary nationalization of insolvent but systemic important banks
6. Takenaka plan
(Fiscal cost)
22
Name Dates (purchases)
Target Purchases Amount Spent (¥ Trillion)
Amount Collected (¥ Trillion)
Comments
Cooperative Credit Purchasing Co. (CCPC)
12/1992-3/2001
Non-performing loans with land collateral of contributing banks
5.8 (market ) [=15.4 book]
Bank financed, created tax benefits by buying loansLiquidated in 3/2004
Tokyo Kyodo Bank 1/1995-4/1999
Initially assets of failed credit unions, later assets of any failed banks
4.718 5.362 Reorganized as Resolution and Collection Bank (RCB) in 9/1996
Housing Loan and Administration Corp. (HLAC)
7/1996-4/1999
Loans of failed jusen (specialty housing loan companies)
4.656 (market) 3.233 Financed with mix of public and private money
Resolution and Collection Corp.
4/1999-6/2005
Combined RCB and HLAC, mandate extended to allow purchases of assets from solvent banks
0.356 (market) [=4.046 book] (beyond earlier HLAC and RCB spending)
0.649 Starting in 2001 also reorganized loans, ultimately involved in restructuring 577 borrowers
Industrial Revitalization Corp. of Japan
5/2003- 3/2005
Buy non-performing loans through 2005, restructure them within 3 years
0.53(market)[=0.97(book)]
NA[0.094 surplus as of 5/2007]
Restructured 41 borrowers with 4 trillion total debtClosed in 5/2007
1. Asset Management Companies
23
24
2. Jusen (background)• Specialized housing finance companies created in the
1970s to provide mortgage financing• In the 1980s, banks (founders of jūsen) started to enter
home mortgage business as they started to lose their traditional customers to capital market
• Jūsen started to lend more to real estate developers• Land price boom intensified the trend• Increasing fund coming from agricultural coops • Non-performing loans of ¥4.6 trillion (38% of total loans)
in 1991
25
2. Liquidation of jusen
• Government led (optimistic) restructuring plans in 1991 and 1993 failed
• By 1995, 75% of loans non-performing (60% completely unrecoverable), leverage > 150
• Write-off of ¥6.41 trillion (¥3.50 trillion by the founder institutions; ¥0.53 trillion by the agricultural coops; ¥1.70 trillion by the other lenders; ¥0.68 trillion by the taxpayers)
• The remaining assets (¥6.6 trillion) transferred to Jūsen Resolution Corporation
• Public anger over the taxpayer cost led to politicians to tread slowly in subsequent bailouts
26
3. Full protection of bank liabilities
1996 ¥10 million limit on deposit insurance (per account) was lifted (to expire on 03/2001)
1997 (Nov.) BOJ and MOF reiterated the full protection of deposits and announced “security” of interbank loans
1998 Bank liabilities were protected when LTCB and NCB were nationalized
2000 Expiration date of the assistance that exceeds the “pay-off costs” moved to 03/2002
27
5. Temporary nationalization
Financial Reconstruction Act of 1998• Weak banks were allowed to apply for nationalization• Long-term Credit Bank asked to be nationalized (Oct
1998) approved• FRC forced nationalization of Nippon Credit Bank
(Dec 1998)• Several failed regional banks put under receivership
(1999-2001)
DateOfficial
Core capital
DeferredTax
Assets
EstimatedUnder-
reserving
Modified Capital
Capital held by gov’t
BankAssets
Capital Gap
A B C D=A-B-C E F G=0.03*F-DMar-96 27.9 0.0 NA 27.9 0.0 846.5 -2.5Mar-97 28.5 0.0 15.0 13.5 0.0 856.0 12.2Mar-98 24.3 0.0 4.9 19.4 0.3 848.0 6.0Mar-99 33.7 8.4 4.0 21.3 6.3 759.7 1.5Mar-00 35.6 8.2 5.8 21.6 6.9 737.2 0.5Mar-01 37.6 7.1 7.5 23.0 7.1 804.3 1.1Mar-02 30.2 10.6 6.8 12.8 7.2 756.1 9.9Mar-03 24.8 10.6 5.4 8.8 7.3 746.3 13.6Mar-04 29.0 7.2 5.7 16.1 8.9 746.7 6.3Mar-05 31.4 5.7 6.9 18.8 8.1 745.9 3.6Mar-06 37.3 2.3 8.3 26.7 5.2 766.9 -3.7Mar-07 40.0 1.3 9.4 29.4 3.5 761.1 -6.5Mar-08 34.8 3.6 10.2 21.0 3.1 780.7 2.4
28
Crude evidence on forbearance
1. Have banks make more rigorous evaluation of assets using discounted expected cash flows or market prices of non-performing loans
2. Check cross-bank consistency in classifying loans to large debtors
3. Publicize the discrepancy between the banks’ self evaluations and the FSA’s evaluations
4. Be prepared to inject public funds if necessary
5. Prohibit banks from declaring unrealistically large deferred tax assets
6. Impose business improvement orders for banks that substantially underachieved the revitalization plans.
Takenaka Plan
29
30
Capital Evolution for Japanese Banks 2003 to 2007 (¥ trillion)
March-07 March-03 ChangePercent
contribution to change
Official Capital 40.0 24.8 15.2 100.00%
Common stock 9.3 10.2 -0.9 -6.13%
Capital surplus 8.7 8.6 0.1 0.39%
Retained earnings 13.4 4.4 9.0 59.07%
Net unrealized gains on stocks and others 8.2 0.1 8.1 53.25%
Revaluation reserve for land 1.0 1.5 -0.6 -3.70%
Net deferred gains on hedging instruments -0.3 0 -0.3 -2.07%
Note: Some small components have been omitted and because of this and rounding columns may not sum to totals.
31
Cumulative
(3/04-7/03)
March-07
March-06
March-05
March-04
March-03
Difference
(3/07-3/04)Net income 8.1 3.4 4.2 1.3 -0.8 4.2
Operating profits 11.5 4.3 4.8 1.9 0.5Extraordinary profits - Extraordinary losses
2.8 0.4 1.2 0.7 0.5
Operating income 19.2 18.0 16.9 17.6 1.6Operating expenses 14.9 13.3 15.0 17.0 -2.2
Unrealized capital gains 8.2 6.8 3.7 3.1
Nikkei 225 17,287 17,059 11,688 11,715 7,973GDP growth (% change from one year earlier)
1.7 2.5 2.4 2.0 2.1
Profit Decomposition for Japanese Banks 2004-2007 (¥ trillion)
Japan’s eventual macroeconomic recovery
32
33
Export-led recovery (contributions to growth, %)
Assistance Recovery
Monetary grants 18,868
Assets purchase 9,778 9,672
Capital injection 12,427 10,539
Others 5,995 4,861
Total 47,068 25,072
Fiscal Cost (FDIC financial assistance and recovery, Sept. 2008, ¥ billion)
34
Net : ¥21,996 billionJusen resolution: ¥ 680 billionLoss compensation for RCC: ¥ 292 billion
Total: gross ¥48,040 billion (about 9.6% of GDP)net ¥22,968 billion (about 4.6% of GDP)
Lessons1. Banks may refuse public funds (fear of signaling troubled situation; creation
of claims senior to the existing shares)
2. Buying troubled assets alone is not likely to solve the capital shortage. Assets purchase program must be combined with recapitalization program – could be privately funded.
3. Programs must be big enough.
4. Programs must be preceded by rigorous inspection (to determine the size of the problem)
5. Troubled assets purchased by AMCs should be put back into the private sector or restructured swiftly.
6. Nationalization can be useful to wind down systemically important banks.
7. Targeting total lending or lending to specific sectors can be counter-productive.
8. Recapitalization ultimately driven by macroeconomic recovery
35
Conclusions
• Asking the banks to “earn their way out” of the capital shortage is a gamble
• Politics can be very difficult if more money is needed– Is GM the largest zombie ever?
• Too early to declare “mission accomplished”
36
Extra slides
37
38
JPM Wachovia Bank of America State Street Wells Fargo$ Billions Bank % assets Bank % assets Bank % assets Bank % assets Bank % assetsLevel 2 Loans and leases 1.5 0.1% 0.0 0.0% 4.2 0.2% 0.0 0.0% 12.1 2.1%Trading assets 1336.0 53.6% 98.6 14.5% 668.4 38.7% 20.0 6.8% 10.0 1.8%Other financial assets 22.8 0.9% 0.0 0.0% 2.6 0.2% 0.1 0.0% 0.0 0.0%
Level 3 Loans and leases 5.9 0.2% 0.0 0.0% 7.6 0.4% 0.0 0.0% 5.1 0.9%Trading assets 65.4 2.6% 12.3 1.8% 11.0 0.6% 1.1 0.4% 0.4 0.1%Other financial assets 0.0 0.0% 0.0 0.0% 0.0 0.0% 0.0 0.0% 0.0 0.0%
Total Assets 2490.8 100.0% 680.8 100.0% 1728.6 100.0% 296.3 100.0% 569.3 100.0%
Citigroup Morgan Stanley Goldman Sachs Bank of NY$ Billions Bank % assets Bank % assets Bank % assets Bank % assetsLevel 2 Loans and leases 9.9 0.6% 7.2 19.0% 0.5 2.1% 0.0 0.0%Trading assets 676.3 37.9% 5.6 14.8% 7.6 34.9% 8.9 3.7%Other financial assets 0.1 0.0% 0.0 0.0% 8.2 38.1% 0.0 0.0%
Level 3 Loans and leases 0.1 0.0% 2.5 6.6% 1.0 4.8% 0.0 0.0%Trading assets 58.0 3.3% 0.0 0.0% 0.0 0.0% 0.1 0.1%Other financial assets 0.0 0.0% 0.0 0.0% 0.0 0.0% 0.0 0.0%
Total Assets 1783.3 100.0% 37.6 100.0% 21.6 100.0% 238.8 100.0%
Source: Call Reports as of Sep 30 2008
Hard to value assets in the trading book of JPM, Bank of America and Citi exceeds $2.5 trillion
Data as of September 2008 (except Morgan Stanley and Goldman Sachs as August) Exposure to
NameTotal
AssetsTotal
Commitments Lending Real EstateCredit Card
Other Consumer
Equity/ Assets
Max Dividend Payout
JPMORGAN CHASE 2,251.5 1,223.6 57.8% 19.2% 25.3% 1.8% 6.5% 5.67BANK OF AMERICA 1,836.5 1,423.1 73.3% 29.4% 28.8% 3.0% 8.8% 5.84MERRILL LYNCH 875.8 123.7 20.0% 8.8% 0.0% 0.5% 4.4% 2.22STATE STREET CORP 286.7 50.9 20.3% 7.4% 1.1% 2.7% 4.6% 0.41CITIGROUP 2,050.1 1,560.0 65.0% 12.4% 32.9% 4.3% 6.1% 3.49BANK OF NY MELLON 267.6 45.5 33.4% 9.9% 0.2% 0.4% 10.3% 1.10WELLS FARGO (incl. Wachovia) 1,382.9 476.9 75.5% 45.7% 6.2% 5.2% 7.0% 4.52MORGAN STANLEY 987.4 162.0 15.8% 21.9% 0.0% 0.0% 3.6% 1.20GOLDMAN SACHS 1,081.8 78.5 9.3% 8.3% 0.0% 0.0% 4.2% 0.55
TOTAL 11,020.3 5,144.3 54.5% 21.1% 19.3% 2.6% 6.3% 25.0Note: Combined Merrill Lynch and Bank of America 2,712.2 1,546.8 60.8% 24.5% 22.0% 2.4% 7.4% 8.1
Selected Data on Major Institutions Participating in the TARP ($ billion)
39
40
Percent of Japanese Bank Loans Less than 1.5%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
40.00%
45.00%
50.00%
1992 1994 1996 1998 2000 2002 2004 2006 2008
Raw Percentage
0
5
10
15
20
25
30
35
40
1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001
(%)
41
Asset-weighted Percentage
0
2
4
6
8
10
12
14
16
18
1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001
(%)
Zombies defined as firms getting subsidized creditThe sample is listed firms in manufacturing, construction, real estate, retail and wholesale (other than the nine largest general trading companies), and services
42
Zombies Hurt Non-Zombies
ijt t j
ijt jt
ijt jt ijt
Activity = constant + α year + δ industry
+ non-zombie + industry zombie%
+ non-zombie *industry zombie% +
Employment growth or Investment
43
Zombie’s Hurt Non-Zombies
Dependent Variable I/K ΔLog E
Sample 1993-2002
1993-2002
Constant 0.239(0.008)
0.014(0.002)
Non-Zombie Dummy 0.026(0.006)
0.0011(0.0018)
Industry Zombie % -0.137(0.038)
-0.045(0.012)
Non-Zombie * Industry Zombie% -0.089(0.033)
-0.023(0.010)
0.054 0.0902R
44
Cross-industry incidence of zombies
All Firms
-10
10
30
50
19811983
19851987
19891991
19931995
19971999
2001
%
Crisp
Fuzzy with (d1, d2) = (0, 50bp)
Fuzzy with (d1, d2) = (-25bp, 75bp)
All Firms
0
10
20
30
40
50
60
19
81
19
82
19
83
19
84
19
85
19
86
19
87
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
%
Manufacturing
0
10
20
30
40
50
60
19
81
19
82
19
83
19
84
19
85
19
86
19
87
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
%
Construction
0
10
20
30
40
50
60
19
81
19
82
19
83
19
84
19
85
19
86
19
87
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
%
Real Estate
0
10
20
30
40
50
60
19
81
19
82
19
83
19
84
19
85
19
86
19
87
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
%
Trade
0
10
20
30
40
50
60
19
81
19
82
19
83
19
84
19
85
19
86
19
87
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
%
Services
0
10
20
30
40
50
60
19
81
19
82
19
83
19
84
19
85
19
86
19
87
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
%
45
Selected Data on Major Japanese Banks (¥ million, 1998)
46
Exposures toBank total assets total loans Loans Real
EstateConstruction
Financial SMC capital/asstot
Dividends
IBJ 45,140,863 19,821,427 43.91% 5.44% 1.12% 8.09% 19.10% 2.36% 21586LTCB 26,190,005 14,639,649 55.90% 10.32% 1.52% 14.14% 25.86% 3.01% 14356NCB 12,659,064 7,678,561 60.66% 19.47% 2.25% 15.89% 37.20% 3.69% 0Daiichi Kangyo Bank 53,798,398 26,759,298 49.74% 6.07% 2.68% 4.10% 34.57% 2.68% 26527SAKURA BANK 51,650,386 29,303,132 56.73% 8.97% 3.08% 5.28% 40.04% 2.51% 32337Fuji Bank 51,088,094 23,442,092 45.89% 4.45% 2.14% 4.15% 34.76% 2.23% 25154ASAHI BANK 29,267,330 17,772,993 60.73% 7.17% 3.74% 2.98% 46.48% 2.58% 14437Sanwa Bank 52,708,359 24,247,237 46.00% 6.81% 1.98% 4.04% 35.73% 2.73% 24742SUMITOMO Bank 58,076,795 28,530,373 49.13% 6.89% 2.73% 3.78% 36.46% 1.96% 26698Daiwa Bank 16,740,731 10,730,139 64.10% 13.40% 3.52% 6.72% 45.28% 2.84% 10910TOKAI BANK 31,943,567 17,126,825 53.62% 7.55% 3.06% 4.96% 36.01% 2.44% 20684ASHIKAGA BANK 5,933,298 4,543,205 76.57% 6.13% 7.26% 3.61% 58.31% 2.38% 3110BANK OF YOKOHAMA 11,258,367 7,884,623 70.03% 9.37% 4.70% 4.61% 51.70% 2.45% 5688HOKURIKU BANK 6,619,220 4,838,597 73.10% 6.72% 8.00% 2.50% 52.91% 2.79% 1372MITSUI TRUST 12,056,928 8,960,108 74.32% 13.16% 2.45% 11.29% 35.43% 3.27% 5992MITSUBISHI TRUST 18,158,026 11,279,843 62.12% 10.65% 2.10% 11.35% 26.23% 2.70% 10418Toyo TRUST 8,154,838 7,117,605 87.28% 17.96% 2.48% 18.92% 42.92% 3.48% 5506CHUO TRUST 3,704,007 3,591,357 96.96% 18.32% 1.87% 20.18% 54.30% 4.89% 1383SUMITOMO TRUST 15,643,662 11,186,519 71.51% 12.92% 2.38% 13.98% 31.55% 2.44% 9952Total 510,791,938 279,453,583 54.71% 8.16% 2.63% 6.48% 35.65% 2.57% 260,852
47