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Corporate Finance Policies and Social Networks

Cesare Fracassi

University of Texas at Austin

December 2, 2015

Management Science, Forthcoming

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

Number of Pages in PDF File: 40

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

JEL Classification: G31, L14

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Date posted: April 18, 2008 ; Last revised: December 22, 2015

Suggested Citation

Fracassi, Cesare, Corporate Finance Policies and Social Networks (December 2, 2015). Management Science, Forthcoming. Available at SSRN: https://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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References:  47
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