How to discipline managers of cooperative structured financial institutions (co-ops) is considered a critical issue by the Japanese financial regulatory authorities because co-ops play a significant role in the domestic banking market, especially for small and medium-sized enterprises. This paper seeks to clarify whether the effect of the governance-related variables on firm performance varies across stock and cooperative banks in Japan. We consider regional banks as a proxy of stock banks and Shinkin banks, one of the representative co-ops, as a proxy of cooperative banks. We use cost and profit efficiency scores obtained from stochastic frontier analysis as performance measures. The results in this paper confirmed that having a large number of board members has negative effects on efficiency measures for both stock and cooperative banks. On the other hand, the presence of outside directors has a significant effect on efficiency measures for cooperative banks, whereas such variables have no significant effect for stock banks. These results suggest that outside directors' discipline is more necessary for cooperative banks than for stock banks, which are under strong pressure from shareholders. For cooperative banks, a high ratio of representative council members, which is the most important decision-making body for Shinkin banks, has negative effects on efficiency measures. Our findings support the current proposals of the financial regulatory authorities' council to appoint outside directors to the board as a means for strengthening governance of the co-ops.

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has been established as a subseries of the SpringerBrief in Economics Series, but in fact this exciting interdisciplinary collection encompasses scholarly research not only in the economics but also in law, political science, business and management, accounting, international relations, and other subdisciplines within the social sciences. As a national university with a special strength in the social sciences, Kobe University actively promotes interdisciplinary research. This series is not limited only to research emerging from Kobe University's faculties of social sciences but also welcomes cross-disciplinary research that integrates studies in the arts and sciences.Kobe University, founded in 1902, is the second oldest national higher education institution for commerce in Japan and is now a preeminent institution for social science research and education in the country. Currently, the social sciences section includes four faculties-Law, Economics, Business Administration, and International Cooperation Studies-and the Research Institute for Economics and Business Administration (RIEB). There are some 230-plus researchers who belong to these faculties and conduct joint research through the Center for Social Systems Innovation and the Organization for Advanced and Integrated Research, Kobe University.This book series comprises academic works by researchers in the social sciences at Kobe University as well as their collaborators at affiliated institutions, Kobe University alumni and their colleagues, and renowned scholars from around the world who have worked with academic staff at Kobe University. Although traditionally the research of Japanese scholars has been publicized mainly in the Japanese language, Kobe University strives to promote publication and dissemination of works in English in order to further contribute to the global academic community.

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Since 2003, the Financial Services Agency (FSA) has set relationship banking enhancement program as an important strategic task to improve the functions of regional financial institutions. In this enhancement program, the FSA recommended that regional financial institutions introduce new financial products such as collateralized loan obligations (CLOs) and collateralized bond obligations (CBOs). However, this was left up to each institution's discretion rather than being mandatory. This resulted in a large difference in the introduction of new products. Therefore, this article has analysed what kinds of credit associations favourably increased the use of new financial products. As a result, it has been confirmed that the larger their lending shares and management scale and the better their business conditions are, the more positively they work on the introduction of new products. Considering the fact that relationships between financial institutions and enterprises tend to be fixed in Japan, this means that medium and small enterprises will have restrictions on the financial products they can use depending on the situation of their main banks.