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Interbank Networks in Pre-war Japan:Structure and Implications

Tetsuji Okazaki and Michiru Sawada
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Tetsuji Okazaki: Faculty of Economics, University of Tokyo

No CARF-F-142, CARF F-Series from Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo

Abstract: In this paper, we explored the structure and implications of interbank networks in pre-war Japan, focusing on director interlocking. It was found that approximately 60% of the banks had at least one connection with another bank through director interlocking. These connections resulted in the construction of complex networks of banks, not to be reduced to core-periphery structures. Based on this finding, the impact of the interbank networks on the financial performance and the survivability of banks was examined. It was revealed that while a bank with a network was not always more profitable compared to a bank without it, a bank which had a network with profitable banks was more profitable. Concerning the probability of failure, it was found that a bank with a network was less likely to fail than a bank without one. In this case as well, the failure probability of a bank was negatively associated with the profitability of the connected banks. In addition, interbank networks affected on bank mergers. Namely, a bank tended to choose a bank in the same network as a counterpart of the merger, which suggests that interbank networks played a role in coordinating bank mergers.

Pages: 42 pages
Date: 2008-12
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https://www.carf.e.u-tokyo.ac.jp/old/pdf/workingpaper/fseries/147.pdf (application/pdf)

Related works:
Journal Article: Interbank networks in prewar Japan: structure and implications (2012) Downloads
Working Paper: Interbank Networks in Prewar Japan: Structure and Implications (2011) Downloads
Working Paper: Interbank Networks in Prewar Japan: Structure and Implications (2011) Downloads
Working Paper: Interbank Networks in Pre-war Japan: Structure and Implications (2008)
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