An institutional structure of corporate groups evolved over the post-war years in Japan, wherein members of a group were linked together through mutual shareholding, often with commercial banks at the centre of the network. This paper examines the functioning of cross-shareholding, as it involved Japan’s commercial banks in the 1990s. It finds that the banks have not been especially successful "monitors" of members of the corporate groups and that corporate management had relatively negative appraisals of the banks. Japan has been passing through a major financial crisis, which has shaken up the role of banks within its main bank system. It has also reduced the extent of cross-shareholding of banks. However, cross-shareholding continues to provide implicit relational contracts that play a role in Japanese business society. This study highlights the importance of paying adequate attention to historical and institutional factors in analyses of development.

21 p. : graphs, tables

Includes bibliographical references.