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Interbank Networks in Prewar Japan: Structure and Implications

Author

Listed:
  • Tetsuji Okazaki

    (Faculty of Economics, University of Tokyo)

  • Michiru Sawada

    (Nihon University)

Abstract
In this paper, we explore the structure and implications of interbank networks in prewar Japan, focusing on director interlocking. We find that approximately half the banks had at least one connection with another bank through director interlocking, and that a bank that had connections with other banks was less likely to fail than a bank without a network. The quality of networks also matters in the sense that the failure probability of a bank with a network was negatively associated with the profitability of the connected banks. On the other hand, there is no strong evidence of financial contagion through networks. In addition, networks of director interlocking contributed to the stabilization of the financial system through coordinating bank mergers.

Suggested Citation

  • Tetsuji Okazaki & Michiru Sawada, 2011. "Interbank Networks in Prewar Japan: Structure and Implications," CARF F-Series CARF-F-250, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
    • Handle: RePEc:cfi:fseres:cf250
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    File URL: https://www.carf.e.u-tokyo.ac.jp/old/pdf/workingpaper/fseries/260.pdf
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    Cited by:

    1. Ron Boschma & Matté Hartog, 2014. "Merger and Acquisition Activity as Driver of Spatial Clustering: The Spatial Evolution of the Dutch Banking Industry, 1850–1993," Economic Geography, Taylor & Francis Journals, vol. 90(3), pages 247-266, July.
    2. Oliver Bischoff & Achim Buchwald, 2018. "Horizontal and Vertical Firm Networks, Corporate Performance and Product Market Competition," Journal of Industry, Competition and Trade, Springer, vol. 18(1), pages 25-45, March.
    3. Mathias Hoffmann & Tetsuji Okazaki & Toshihiro Okubo, 2019. "Branch Banking and Regional Financial Markets: Evidence from Prewar Japan," CIGS Working Paper Series 19-001E, The Canon Institute for Global Studies.
    4. Tetsuji Okazaki & Toshihiro Okubo & Eric Strobl, 2020. "The Bright and Dark Side of Financial Support from Local and Central Banks after a Natural Disaster: Evidence from the Great Kanto Earthquake, 1923 Japan," Keio-IES Discussion Paper Series 2020-001, Institute for Economics Studies, Keio University.
    5. Ron Boschma & Emanuela Marrocu & Raffaele Paci, 2016. "Symmetric and asymmetric effects of proximities. The case of M&A deals in Italy," Journal of Economic Geography, Oxford University Press, vol. 16(2), pages 505-535.
    6. Okazaki, Tetsuji & Sawada, Michiru, 2017. "Measuring the extent and implications of corporate political connections in prewar Japan," Explorations in Economic History, Elsevier, vol. 65(C), pages 17-35.
    7. Tetsuji Okazaki, 2015. "Bank Behavior in Regional Finance and the Development of Regional Industries: The Case of Prewar Fukushima, Japan," CIRJE F-Series CIRJE-F-972, CIRJE, Faculty of Economics, University of Tokyo.
    8. Abdelbadie, Roba Ashraf & Salama, Aly, 2019. "Corporate governance and financial stability in US banks: Do indirect interlocks matter?," Journal of Business Research, Elsevier, vol. 104(C), pages 85-105.
    9. Tetsuji Okazaki, 2015. "Bank Behavior in Regional Finance and the Development of Regional Industries:The Case of Prewar Fukushima, Japan," CIGS Working Paper Series 15-001E, The Canon Institute for Global Studies.
    10. Esteves, Rui & Geisler Mesevage, Gabriel, 2019. "Social Networks in Economic History: Opportunities and Challenges," Explorations in Economic History, Elsevier, vol. 74(C).
    11. Claire E. F. Wright, 2022. "Above board? Interlocking directorates and corporate contagion in 1980s Australia," Australian Economic History Review, Economic History Society of Australia and New Zealand, vol. 62(3), pages 290-312, November.
    12. Tetsuji Okazaki & Toshihiro Okubo & Eric Strobl, 2024. "The Bright and Dark Sides of a Central Bank's Financial Support to Local Banks after a Natural Disaster: Evidence from the Great Kanto Earthquake, 1923 Japan," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 56(6), pages 1439-1477, September.

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