Abstract

http://ssrn.com/abstract=1121503
 
 

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Corporate Finance Policies and Social Networks


Cesare Fracassi


University of Texas at Austin

April 17, 2014

AFA 2011 Denver Meetings Paper

Abstract:     
This paper shows that managers are influenced by their social peers when making corporate policy decisions. Using a matrix of social ties from current and past employment, education, and other activities for US executives and directors, we find that more social connections two companies share with each other, more similar their capital investments are. To address endogeneity concerns, we find that two companies invest less similarly when an individual connecting them dies. The results extend to other corporate finance policies. Furthermore, companies positioned centrally in the social network invest in a less idiosyncratic way, and exhibit better economic performance.

Number of Pages in PDF File: 52

Keywords: Corporate Finance Policy Decisions; Social Networks; Capital Investments.

JEL Classification: G31, L14

working papers series





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Date posted: April 18, 2008 ; Last revised: April 17, 2014

Suggested Citation

Fracassi, Cesare, Corporate Finance Policies and Social Networks (April 17, 2014). AFA 2011 Denver Meetings Paper. Available at SSRN: http://ssrn.com/abstract=1121503 or http://dx.doi.org/10.2139/ssrn.1121503

Contact Information

Cesare Fracassi (Contact Author)
University of Texas at Austin ( email )
Red McCombs School of Business
1 University Station B660
Austin, TX 78712
United States
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