The Ties That Bind?

A great deal of rich statistical evidence attests to the strong and central presence of financial institutions in corporate board interlocks. There is no consensus, however, concerning the interpretation of the significance of those statistics. Here, case studies of corporations in crisis trace those financial interlocks prior to, during, and after the firms' crises. The evidence suggests that nonfinancial firms do not consistently exhibit the predicted pattern of centrality as it relates to corporate crisis. Furthermore, those interlocks do not appear to reflect dyadic functional relationships between firms; nor do they in and of themselves indicate power relationships between banks and nonfinancials. Here, the source of financial institutions' power was structurally unified control of capital flows. Corporate interlocks appear to be “traces of power,” reflective of bank-nonbank relationships forged in capital flow arrangements and functioning as informational “business scan” mechanisms that inform capital flow strategies.