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Interbank Networks in Prewar Japan: Structure and Implications

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  • Tetsuji Okazaki

    (Faculty of Economics, University of Tokyo)

  • Michiru Sawada

    (Nihon University College of Economics,)

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    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.

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    File URL: http://www.cirje.e.u-tokyo.ac.jp/research/dp/2011/2011cf805.pdf
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    Bibliographic Info

    Paper provided by CIRJE, Faculty of Economics, University of Tokyo in its series CIRJE F-Series with number CIRJE-F-805.

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    Length: 61 pages
    Date of creation: Jul 2011
    Date of revision:
    Handle: RePEc:tky:fseres:2011cf805

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