The Money Center Cannot Hold: Commercial Banks in the Us System of Corporate Governance

Posted: 23 Sep 1999

See all articles by Gerald F. Davis

Gerald F. Davis

University of Michigan, Stephen M. Ross School of Business

Mark S. Mizruchi

University of Michigan at Ann Arbor - Horace H. Rackham School of Graduate Studies; University of Michigan, Stephen M. Ross School of Business

Abstract

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 non-bank 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.

JEL Classification: G21, G34

Suggested Citation

Davis, Gerald F. and Mizruchi, Mark S., The Money Center Cannot Hold: Commercial Banks in the Us System of Corporate Governance. Administrative Science Quarterly, June 1999. Available at SSRN: https://ssrn.com/abstract=173613

Gerald F. Davis (Contact Author)

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI 48109-1234
United States
734-647-4737 (Phone)
734-936-0282 (Fax)

Mark S. Mizruchi

University of Michigan at Ann Arbor - Horace H. Rackham School of Graduate Studies ( email )

701 Tappan Street
Ann Arbor, MI 48709-1220
United States
734-764-7444 (Phone)

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States

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