Social Capital Consideration in Promotion Decisions: Do Supervisors Favor Subordinates in Their Social Network?

Posted: 15 Aug 2011 Last revised: 26 Mar 2015

See all articles by Simon Jonghwan Kim

Simon Jonghwan Kim

University of Manchester - Division of Accounting and Finance

Date Written: August 15, 2011

Abstract

In this research, I examine the presence of favoritism in promotion decisions for executives in large Korean conglomerate firms. More specifically, I test whether a promotion is more likely when an executive has an established (strong) social connection with the current supervisor who has real promotion decision authority. Additionally, I investigate whether alterations of accounting performance measures for relative evaluation provide leeway for additional subjectivity to favor an executive. The analysis using a sample of 3,990 executive-years shows that when an executive has a strong social tie with one of his supervisors in high level organizations, (i) a promotion is more likely, and (ii) ROA becomes less influential whereas a relative performance measure against the industry average gains influence in promotion decisions. Further, other findings suggest that supervisors consider more social capital issues when making promotion decisions for elite (i.e., high-ranking and more influential) members.

Keywords: promotion, incentive, social capital

JEL Classification: M41, M50, M51, M12, J30

Suggested Citation

Kim, Jonghwan, Social Capital Consideration in Promotion Decisions: Do Supervisors Favor Subordinates in Their Social Network? (August 15, 2011). Available at SSRN: https://ssrn.com/abstract=1909677 or http://dx.doi.org/10.2139/ssrn.1909677

Jonghwan Kim (Contact Author)

University of Manchester - Division of Accounting and Finance ( email )

Booth Street West
Manchester, M13 9SS
United Kingdom

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