This paper examines how the place of banks in the intercorporate network has changed as a result of their decreasing role as financial intermediaries in the U.S. economy. An analysis of comprehensive data on the boards of the fifty largest banks and their connections with the several hundred largest nonbank corporations from 1982 to 1994 shows that the centrality of banks has significantly declined as executives of major corporations, particularly those representing central firms, joined bank boards at a substantially lower rate. Declining centrality reflects a strategic choice on the part of the banks: as the returns available from lending to major corporations have declined, the largest banks have moved into other forms of business and reduced their recruiting of centrally located directors. We conclude with a discussion of the role of financial intermediation in shaping the social organization of the economy.
Get full access to this article
View all access options for this article.
References
1.
AldrichHoward E.1979Organizations and Environments. Englewood Cliffs, NJ: Prentice-Hall.
1978“Economic interest groups and the corporate elite structure.”Social Science Quarterly, 58: 597–615.
4.
BarthJames R.Dan BrumbaughR.Jr.LitanRobert E.1992The Future of American Banking. Armonk, NY: M. E. Sharpe.
5.
BakerWayne E.1990“Market networks and corporate behavior.”American Journal of Sociology, 96: 589–625.
6.
BergerAllen N.KashyapAnil K.ScaliseJoseph M.1995“The transformation of the U.S. banking industry: What a long, strange trip it's been.” In BrainardWilliam C.PerryGeorge L. (eds.), Brookings Papers on Economic Activity, 2: 55–201. Washington, DC: Brookings Institution.
7.
BerleAdolphJr.MeansGardiner C.1932The Modern Corporation and Private Property. New York: Macmillan.
8.
BonacichPhillip1972“Technique for analyzing overlapping memberships.” In CostnerHerbert (ed.), Sociological Methodology: 176–185. San Francisco: Jossey-Bass.
9.
BrandeisLouis D.1914Other People's Money and How the Bankers Use It. New York: Frederick A. Stokes.
10.
BuntingDavid1976“Corporate interlocking. Part III: Interlocks and return on investment.”Directors and Boards1 (Fall): 4–11.
11.
1983“Origins of the American corporate network.”Social Science History, 7: 129–142.
12.
CalomirisCharles W.RamirezCarlos D.1996“The role of financial relationships in the history of American corporate finance.”Journal of Applied Corporate Finance, 9(2): 52–73.
13.
CurranJohn1997“GE Capital: Jack Welch's secret weapon.”Fortune (November 10): 116–134.
14.
DavisGerald F.1991“Agents without principles? The spread of the poison pill through the intercorporate network.”Administrative Science Quarterly, 36: 583–613.
15.
1994“The corporate elite and the politics of corporate control.” In PrendergastChristopherKnottnerusJ. David (eds.), Current Perspectives in Social Theory, Supplement, 1: 215–238. Greenwich, CT: JAI Press.
16.
DavisGerald F.GreveHenrich R.1997“Corporate elite networks and governance changes in the 1980s.”American Journal of Sociology, 103: 1–37.
17.
DavisGerald F.ThompsonTracy A.1994“A social movement perspective on corporate control.”Administrative Science Quarterly, 39: 141–173.
EasterbrookFrank H.FischelDaniel R.1991The Economic Structure of Corporate Law. Cambridge, MA: Harvard University Press.
20.
FamaEugeneJensenMichael C.1983“Separation of ownership and control.”Journal of Law and Economics, 26: 301–325.
21.
Federal Deposit Insurance Corporation1996FDIC Historical Statistics on Banking, 1934–1996. Washington, DC: FDIC.
22.
FligsteinNeil1990The Transformation of Corporate Control. Cambridge, MA: Harvard University Press.
23.
FreemanLinton C.1979“Centrality in communication networks: Conceptual clarification.”Social Networks, 2: 119–141.
24.
FriedlandRogerPalmerDonald1994“Space, corporation, and class: Toward a grounded theory. In FriedlandRogerBodenDeirdre (eds.), NowHere: Space, Time, and Modernity: 287–334. Berkeley: University of California Press.
25.
GalbraithJohn Kenneth1967The New Industrial State. Boston: Houghton Mifflin.
26.
GilsonRonald J.RoeMark J.1993“Understanding the Japanese keiretsu: Overlaps between corporate governance and industrial organization.”Yale Law Journal, 102: 871–906.
27.
GranovetterMark1995“Coase revisited: Business groups in the modern economy.”Industrial and Corporate Change, 4: 93–130.
28.
HaunschildPamela1993“Interorganizational imitation: The impact of interlocks on corporate acquisition activity.”Administrative Science Quarterly, 38: 564–592.
29.
JamesChristopherHoustonJoel1996“Evolution or extinction: Where are banks headed?”Journal of Applied Corporate Finance, 9(2): 8–23.
30.
JensenMichael C.MecklingWilliam H.1976“Theory of the firm: Managerial behavior, agency cost and ownership structure.”Journal of Financial Economics, 3: 305–360.
31.
KaufmanGeorge G.1993“The diminishing role of commercial banking in the U.S. economy.” In WhiteLawrence H. (ed.), The Crisis in American Banking: 139–159. New York: New York University Press.
32.
KotzDavid1978Bank Control of Large Corporations in the United States. Berkeley: University of California Press.
33.
LangJames R.LockhartDaniel E.1990“Increased environmental uncertainty and changes in board linkage patterns.”Academy of Management Journal, 33: 106–128.
34.
LashScottUrryJohn1987The End of Organized Capitalism. Oxford: Polity Press.
35.
LevineJoel1977“The theory of bank control.” Comment on Mariolis” test of the theory.”Social Science Quarterly, 58: 506–510.
36.
ManneHenry G.1965“Mergers and the market for corporate control.”Journal of Political Economy, 73: 110–120.
37.
MariolisPeter1975“Interlocking directorates and control of corporations: The theory of bank control.”Social Science Quarterly, 56: 425–439.
38.
1977“Type of corporation, size of firm, and interlocking directorates: A reply to Levine.”Social Science Quarterly, 58: 511–513.
39.
MariolisPeterJonesMaria H.1982“Centrality in corporate interlock networks: Reliability and stability.”Administrative Science Quarterly, 27: 571–584.
40.
MayerMartin1997The Bankers: The Next Generation. New York: Truman Talley/Dutton.
41.
MintzBethSchwartzMichael1985The Power Structure of American Business. Chicago: University of Chicago Press.
42.
MizruchiMark S.1982The American Corporate Network, 1904–1974. Beverly Hills, CA: Sage.
43.
1992The Structure of Corporate Political Action: Interfirm Relations and Their Consequences. Cambridge, MA: Harvard University Press.
44.
1996“What do interlocks do? An analysis, critique, and assessment of research on interlocking directorates.”Annual Review of Sociology, 22: 271–298. Palo Alto, CA: Annual Reviews.
45.
MizruchiMark S.BuntingDavid1981“Influence in corporate networks: An examination of four measures.”Administrative Science Quarterly, 26: 475–489.
46.
MizruchiMark S.PottsBlyden B.AllisonDavid W.1993“Interlocking directorates and business transactions: New evidence on an old question.” Paper presented at the Annual Meeting of the American Sociological Association, Miami Beach.
47.
MizruchiMark S.StearnsLinda Brewster1988“A longitudinal study of the formation of interlocking directorates.”Administrative Science Quarterly, 33: 194–210.
48.
1994a“Money, banking, and financial markets.” In SmelserNeil J.SwedbergRichard (eds.), Handbook of Economic Sociology: 313–341. Princeton: Princeton University Press.
49.
1994b“A longitudinal study of borrowing by large American corporations.”Administrative Science Quarterly, 39: 118–140.
50.
NeivaElizabeth Maciver1996“The current state of American corporate governance.” Unpublished paper, Institutional Investor Project, Columbia University Law School.
51.
O'ReillyCharles A.IIIMainBrian G.CrystalGraef S.1988“CEO compensation as tournament and social comparison: A tale of two theories.”Administrative Science Quarterly, 33: 257–274.
PalmerDonaldFriedlandRogerSinghJitendra1986“The ties that bind: Organizational and class bases of stability in a corporate interlock network.”American Sociological Review, 51: 781–796.
54.
PenningsJohannes M.1980Interlocking Directorates. San Francisco: Jossey-Bass.
55.
PfefferJeffrey1972“Size and composition of corporate boards of directors: The organization and its environment.”Administrative Science Quarterly, 17: 218–228.
56.
PfefferJeffreySalancikGerald R.1978The External Control of Organizations: A Resource Dependence Perspective. New York: Harper & Row.
57.
RatcliffRichard E.1980“Banks and corporate lending: An analysis of the impact of the internal structure of the capitalist class on the lending behavior of banks.”American Sociological Review, 45: 553–570.
58.
RichardsonJackR.1987“Directorship interlocks and corporate profitability.”Administrative Science Quarterly, 32: 367–386.
59.
RoeMark J.1994Strong Managers, Weak Owners: The Political Roots of American Corporate Finance. Princeton: Princeton University Press.
60.
RogersDavid1993The Future of American Banking: Managing for Change. New York: McGraw-Hill.
61.
RoyWilliam G.1983“The unfolding of the interlocking directorate structure of the United States.”American Sociological Review, 48: 248–257.
62.
ScottRichardW.1992Organizations: Rational, Natural, and Open Systems, 3rd ed.Englewood Cliffs, NJ: Prentice-Hall.
63.
StearnsLinda Brewster1986“Capital market effects on external control of corporations.”Theory and Society, 15: 47–75.
64.
StearnsLinda BrewsterMizruchiMark S.1986“Broken-tie reconstitution and the functions of interorganizational interlocks: A reexamination.”Administrative Science Quarterly, 31: 522–538.
65.
1993“Board composition and corporate financing: The impact of financial institution representation on borrowing.”Academy of Management Journal, 36: 603–618.
66.
StokmanFrans N.Van der KnoopJelleWasseurFrans W.1988“Interlocks in the Netherlands: Stability and careers in the period 1960–1980.”Social Networks, 10: 183–208.
67.
UseemMichael1984The Inner Circle. New York: Oxford University Press.
68.
Wall Street Journal1993“The end of banking as we know it—losing ground: Banks” declining role in economy worries Fed, may hurt firms.”July, 9: A1.
69.
1996“Surge in investments changes U.S. economy.”June, 10: A1.
70.
ZajacEdward J.1988“Interlocking directorates as an interorganizational strategy: A test of critical assumptions.”Academy of Management Journal, 31: 428–438.
71.
ZysmanJohn1983Governments, Markets, and Growth: Financial Systems and the Politics of Industrial Change. Ithaca, NY: Cornell University Press.
