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Interbank Networks in Prewar Japan: Structure and Implications

Author

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  • 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: http://www.carf.e.u-tokyo.ac.jp/pdf/workingpaper/fseries/260.pdf
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    Cited by:

    1. 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.
    2. 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, Clark University, vol. 90(3), pages 247-266, July.

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