Social Networks in the Global Banking Sector
70 Pages Posted: 2 Jul 2013 Last revised: 8 Oct 2017
Date Written: October 5, 2017
We show that banks with shared social connections partner more often in the global syndicated loan market and that central banks in the network play dominant roles in various interbank transactions, indicating that social connections facilitate business connections. However, more centralized banks in the network also contribute significantly to the global systemic risk. Moreover, we find the soft information generated by social networks is particularly valuable when potential partners operate under different accounting and regulatory standards. Finally, we show that the recent banking crisis significantly limited the positive soft information effects of social networks in the global banking system.
Keywords: Top global banks, director social networks, pairwise connection, network centrality, loan syndication, systemic risk, IFRS, bank regulation, financial crisis
JEL Classification: G20, G24, G28
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