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

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  • Okazaki, Tetsuji
  • Sawada, Michiru

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

  • Okazaki, Tetsuji & Sawada, Michiru, 2011. "Interbank Networks in Prewar Japan: Structure and Implications Interbank Networks in Prewar Japan: Structure and Implications," PRIMCED Discussion Paper Series 21, Institute of Economic Research, Hitotsubashi University.
  • Handle: RePEc:hit:primdp:21
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    File URL: http://hermes-ir.lib.hit-u.ac.jp/rs/bitstream/10086/22873/1/No21-dp.pdf
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    More about this item

    Keywords

    Networks; Banks; Director Interlocking; Mergers; Japan;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • N25 - Economic History - - Financial Markets and Institutions - - - Asia including Middle East

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