Measuring the Extent and Implications of Director Interlocking in the Pre-war Japanese Banking Industry

Tetsuji Okazaki and Kazuki Yokoyama

No CIRJE-F-138, CIRJE F-Series from CIRJE, Faculty of Economics, University of Tokyo

Abstract: Economic historians have long accepted the view that in prewar Japan, many of the banks were closely connected with certain industrial companies, and those banks loosely gave loans to the connected companies. However, there has been no attempt to test this view quantitatively. In this paper, we measured the extent and implications of the director interlocking in the prewar banking industry, through compiling a comprehensive database of company directors and auditors in 1926. We found that interlocking of directors and auditors between banks and non-banking companies was very pervasive. Nearly 90% of ordinary banks had more than one directors or auditors who were at the same time directors or auditors of non-banking companies. Also, through regression analyses, we found that those banks with interlocking were less profitable and had riskier financial structures, and that interlocking increased the probability of bank closure and bank runs.

Pages: 47 pages
Date: 2001-10
New Economics Papers: this item is included in nep-sea
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Citations: View citations in EconPapers (7)

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Related works:
Journal Article: Measuring the Extent and Implications of Director Interlocking in the Prewar Japanese Banking Industry (2005)
Working Paper: Measuring the Extent and Implications of Director Interlocking in the Pre-war Japanese Banking Industry (2005)
Working Paper: Measuring the Extent and Implications of Director Interlocking in the Pre-war Japanese Banking Industry (2003)
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