The Value of Social Networks During Periods of Distress

45 Pages Posted: 26 Nov 2011 Last revised: 28 Sep 2017

See all articles by Qianqian Huang

Qianqian Huang

City University of Hong Kong

Feng Jiang

University at Buffalo - School of Management

Erik Lie

University of Iowa - Henry B. Tippie College of Business

Date Written: December 20, 2012

Abstract

We examine the impact of social networks when they are likely to be most valuable. We find that firms well-connected to other firms through executives and directors have better performance and more investments during the 2007-2009 financial crisis, and this is especially true among financially constrained firms. When individual firms become severely financially distressed, personal connections to lenders reduce the probability of bankruptcy filing. Firms with lender connections are also more likely to obtain Debtor-in-Possession financing and emerge from Chapter 11 if they nevertheless have to file. Overall, our results suggest that social networks benefit firms in times of distress.

Keywords: Social Networks, Financial Crisis, Financial Distress, Bankruptcy

JEL Classification: A14, G31, G33

Suggested Citation

Huang, Qianqian and Jiang, Feng and Lie, Erik, The Value of Social Networks During Periods of Distress (December 20, 2012). Available at SSRN: https://ssrn.com/abstract=1964775 or http://dx.doi.org/10.2139/ssrn.1964775

Qianqian Huang (Contact Author)

City University of Hong Kong ( email )

83 Tat Chee Avenue
Kowloon
Hong Kong
852-3442-0284 (Fax)

Feng Jiang

University at Buffalo - School of Management ( email )

344 Jacobs Management Center
Buffalo, NY 14260
United States
716-645-3225 (Phone)

Erik Lie

University of Iowa - Henry B. Tippie College of Business ( email )

Acquisitions
5020 Main Library
Iowa City, IA 52242-1000
United States

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