Social Networks in the Global Banking Sector

Joel F. Houston, Jongsub Lee, Felix Suntheim
2013 Social Science Research Network  
We construct a wide variety of social network measures within the global banking system using the board connections of top global banks from 16 countries in the post-2000 period. Our measures illustrate that social networks among top banks are extensive and have become increasingly important over time. We hypothesize that these connections may facilitate valuable information flows, but they may also foster a "group-think" mentality that could lead to instability in the global banking sector.
more » ... eed, we find evidence supporting both views. Connected banks are more likely to partner together in the global syndicated loan market, which suggests that social connections generate valuable information which translates into business connections. However, consistent with "group-think" concerns, we find that the more central banks in the network contribute significantly to the systemic risk of the global banking system, suggesting that there is also a potential dark side to having a strong social network. for generously providing their data on the organizational structure of the top 100 lead arrangers in the U.S. syndicated loan market. We also thank Mark Flannery, Cesare Fracassi (2013 SFS Finance Cavalcade Discussant), Byoung-Hyoun Hwang, Arjen Siegmann (2013 EFA Discussant), and the participants at the 2013 SFS Finance Cavalcade and 2013 EFA Annual Meeting for their insightful comments and suggestions. Aaron Brauner and Changhyun Ahn provided excellent research assistance. All remaining errors are our own.
doi:10.2139/ssrn.2288134 fatcat:3ys4rko4ifegbbaoz2gpbzrn7q