More than Connectedness – Heterogeneity of CEO Social Network and Firm Value

60 Pages Posted: 10 Nov 2012

See all articles by Yiwei Fang

Yiwei Fang

Rensselaer Polytechnic Institute (RPI) - Lally School of Management & Technology

Bill Francis

Rensselaer Polytechnic Institute (RPI) - Lally School of Management & Technology

Iftekhar Hasan

Fordham University ; Bank of Finland; University of Sydney

Date Written: August 20, 2012

Abstract

This paper examines through various channels the effects of CEO social network heterogeneity on firm value. We construct four measures of heterogeneity based on demographic attributes, intellectual backgrounds, professional experience, and geographical exposures of individuals in the CEO social network. We find that CEO social network heterogeneity leads to higher Tobin's Q of firms. Greater CEO social network heterogeneity also leads to: (i) more innovation, (ii) more foreign sales growth, (iii) higher investment sensitivity to Tobin’s Q, and (iv) better M&A performance. Overall, our results indicate that CEO social network heterogeneity is an aspect of CEO social capital and soft skills that deserves the attention of shareholders.

Keywords: CEO, social networks, corporate finance policy decisions, firm value

JEL Classification: G32, G30, D71, Z10

Suggested Citation

Fang, Yiwei and Francis, Bill and Hasan, Iftekhar, More than Connectedness – Heterogeneity of CEO Social Network and Firm Value (August 20, 2012). Bank of Finland Research Discussion Paper No. 26/2012, Available at SSRN: https://ssrn.com/abstract=2172767 or http://dx.doi.org/10.2139/ssrn.2172767

Yiwei Fang

Rensselaer Polytechnic Institute (RPI) - Lally School of Management & Technology ( email )

110 8th St
Troy, NY 12180
United States

Bill Francis

Rensselaer Polytechnic Institute (RPI) - Lally School of Management & Technology ( email )

110 8th St
Troy, NY 12180
United States

Iftekhar Hasan (Contact Author)

Fordham University ( email )

45 COLUMBUS AVENUE
GBA-5TH FLOOR
NEW YORK, NY 10023
United States

Bank of Finland ( email )

P.O. Box 160
Helsinki 00101
Finland

University of Sydney ( email )

P.O. Box H58
Sydney, NSW 2006
Australia

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