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Interbank Networks in Prewar Japan: Structure and Implications Interbank Networks in Prewar Japan: Structure and Implications

Tetsuji Okazaki and Michiru Sawada

No 21, PRIMCED Discussion Paper Series from Institute of Economic Research, Hitotsubashi 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.

Keywords: Networks; Banks; Director Interlocking; Mergers; Japan (search for similar items in EconPapers)
JEL-codes: G21 G34 L14 L22 N25 (search for similar items in EconPapers)
Date: 2011-07
New Economics Papers: this item is included in nep-his and nep-net
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