Abstract
This study assesses the network structures of cross-shareholdings among listed Japanese companies using a dataset of 2,936 companies for fiscal years 2008-2015. First, we analyze the network structure of cross-shareholdings in the Japanese stock market using centrality measures. Financial institutions and companies in the motor manufacturing industry are central in the network in terms of degree centrality. By contrast, companies in various industries play a central role in terms of betweenness centrality. In addition, the implementation of Japan's Corporate Governance Code (JCGC) had a limited effect in reducing cross-shareholdings. Second, the credit risk analysis investigates the effect of cross-shareholdings using a panel regression. The result shows that the increase in the share of foreign companies did not increase the counterparty credit risk in the network. JCGC implementation could potentially counteract the control of cross-shareholdings of companies in the same sector. In addition, if a direct centrality measure increases, the connections via cross-shareholding become denser and increase credit risk. By contrast, if an indirect centrality increases, the connections become sparser and decrease credit risk. The results could give senior managers an important warning in terms of credit risk management related to cross-shareholdings.
Published Version
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