The Ministry of Finance and the disclosure of bad debts in Japan: A model
The reluctance of The Ministry of Finance (MOF) to disclose non-performing loans in the banking industry caused a delay in its rescue operations and, as a result, exacerbated the financial crisis in Japan in the 1990s. This paper attempts to answer the question of why the MOF balked at disclosing the bad loan problem. We focus on the reputation concern of the MOF, and develop a model which explores factors that prevented the MOF from truth-telling. The model predicts that the reputation effect...[Show more]
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