Capital injection, restructuring targets and personnel management: The case of Japanese regional banks

► Japan's bank recapitalization program required large cuts on employee sizes. ► We investigate whether banks under recapitalization shifted employees to subsidiaries to boost appearance of compliance. ► The sample consists of a panel of 82 regional banks 1994-2006. ► We found four banks shifted personnel to subsidiaries but only temporarily. ► Overall the program provided sufficient incentives to conduct layoffs.