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

The studyapplies a GMM framework on the yearly data of Japanese banks ranging from 2001 to 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.