Abstract

http://ssrn.com/abstract=2134801
 


 



Does it Pay to Have Friends? - Social Ties and Executive Appointments in Banking


Allen N. Berger


University of South Carolina - Moore School of Business; Wharton Financial Institutions Center; European Banking Center

Thomas K. Kick


Deutsche Bundesbank

Michael Koetter


Frankfurt School of Finance and Management

Klaus Schaeck


University of Wales - Bangor Business School

August 23, 2012

Journal of Banking and Finance, Vol. 37, pp. 2087-2105

Abstract:     
We exploit a unique sample to analyze how homophily (affinity for similar others) and social ties affect career outcomes in banking. We test if these factors increase the probability that the appointee to an executive board is an outsider without previous employment at the bank compared to being an insider. Homophily based on age and gender increase the chances of the outsider appointments. Similar educational backgrounds, in contrast, reduce the chance that the appointee is an outsider. Greater social ties also increase the probability of an outside appointment. Results from a duration model show that larger age differences shorten tenure significantly, whereas gender similarities barely affect tenure. Differences in educational backgrounds affect tenure differently across the banking sectors. Maintaining more contacts to the executive board reduces tenure. We also find weak evidence that social ties are associated with reduced profitability, providing some evidence of cronyism in banking.

Number of Pages in PDF File: 54

Keywords: social networks, executive careers, banking, corporate governance

JEL Classification: G21, G32, G34, J16

Accepted Paper Series


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Date posted: August 23, 2012 ; Last revised: March 12, 2014

Suggested Citation

Berger, Allen N. and Kick, Thomas K. and Koetter, Michael and Schaeck, Klaus, Does it Pay to Have Friends? - Social Ties and Executive Appointments in Banking (August 23, 2012). Journal of Banking and Finance, Vol. 37, pp. 2087-2105. Available at SSRN: http://ssrn.com/abstract=2134801 or http://dx.doi.org/10.2139/ssrn.2134801

Contact Information

Allen N. Berger (Contact Author)
University of South Carolina - Moore School of Business ( email )
1705 College St
Francis M. Hipp Building
Columbia, SC 29208
United States
803-576-8440 (Phone)
803-777-6876 (Fax)
Wharton Financial Institutions Center
Philadelphia, PA 19104-6367
United States
European Banking Center
P.O. Box 90153
Tilburg, 5000 LE
Netherlands
Thomas K. Kick
Deutsche Bundesbank ( email )
Wilhelm-Epstein-Str. 14
D-60431 Frankfurt/Main
Germany
Michael Koetter
Frankfurt School of Finance and Management ( email )
Sonnemannstraße 9-11
Frankfurt am Main, 60314
Germany
Klaus Schaeck
University of Wales - Bangor Business School ( email )
Bangor, Gwynedd, Wales LL57 2DG
United Kingdom
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