Market-based finance eroded the network centrality of commercial bank boards.

Evidence

One sign of their prominence is that banks’ corporate boards were particularly large and well-connected, populated by prominent directors who were often CEOs of major companies. In 1982, for instance, Chase Manhattan’s board included top executives from Ford, General Foods, Macy’s, Exxon, Xerox, AT&T, Pfizer, Cummins Inc., Bethlehem Steel, and several other Fortune 500 companies. A prominent board provided high-level intelligence to guide the bank’s lending and gave a sheen of legitimacy to the bank itself (Mintz & Schwartz 1985). Yet over the next 15 years, as lending by commercial banks was increasingly displaced by money markets and other forms of market-based finance, bank boards shrank substantially and cut back on the recruiting of CEOs. Within a few years, as banks shifted to more transactional businesses, their boards were no better connected than those of other firms (Davis & Mizruchi 1999). — Gerald F. Davis & Suntae Kim, Financialization of the Economy, 107

Categorization

• XREF: Connects to the broader financialization literature’s claim that bank lending’s displacement by markets restructured corporate governance and interlock networks. — connects to: Financialization shifts capital intermediation from institutions to markets. — Gerald F. Davis & Suntae Kim, Financialization of the Economy, 5; Market-centered finance dissolved the cohesive corporate elite class. — Gerald F. Davis & Suntae Kim, Financialization of the Economy, 112; Financialization weakened rather than strengthened individual financial institutions — Gerald F. Davis & Suntae Kim, Financialization of the Economy, 106 (+1 more)

Related

• Market-centered finance dissolved the cohesive corporate elite class. (similarity 0.84)
• Bank consolidation and interlock collapse fractured American corporate elites’ political cohesion. (similarity 0.83)
• Financialization shifts capital intermediation from institutions to markets. (similarity 0.80)
• Financialization weakened rather than strengthened individual financial institutions (similarity 0.79)

Broader Connections

• Financialization shifts capital intermediation from institutions to markets. #corroborates (0.82) — Gerald F. Davis & Suntae Kim, Financialization of the Economy, 5
• Market-centered finance dissolved the cohesive corporate elite class. #expands (0.78) — Gerald F. Davis & Suntae Kim, Financialization of the Economy, 112
• Financialization weakened rather than strengthened individual financial institutions #expands (0.74) — Gerald F. Davis & Suntae Kim, Financialization of the Economy, 106