How does economic liberalization affect banks’ profits: empirical evidence from the Japanese banking sector‎?

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ABSTRACT The studyapplies a GMM framework on the yearly data of Japanese banks ranging from 2001‎to 2020 to examine the impact of economic liberalization on the ‎banks'profitability. The results reveal that the relationship between economicliberalization and banks' profitability is positive (negative) for the fullsample and commercial (cooperative) banks. The outcomes show that ‎economicliberalization increases banks' profitability during the crisis period. Theresults indicate that economic liberalization, government integrity, business,‎investment and financial liberalization adversely (positively) affect theprofitability of well-capitalized ‎‎(under-capitalized) banks. Furthermore, theheterogeneity in results have implications for policymakers and bank managers. ‎