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

60 Pages Posted: 8 Jun 2016

See all articles by Allen N. Berger

Allen N. Berger

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

Thomas K. Kick

Deutsche Bundesbank

Michael Koetter

Halle Institute for Economic Research

Klaus Schaeck

University of Bristol

Multiple version iconThere are 2 versions of this paper

Date Written: 2011

Abstract

Social capital theory predicts individuals establish social ties based on homophily, i.e., affinities for similar others. We exploit a unique sample to analyze how similarities and social ties affect career outcomes in banking based on age, education, gender, and employment history to examine if homophily and connectedness increase the probability that the appointee to an executive board is an outsider (an individual without previous employment at the bank) compared to being an insider. Our results show that homophily based on age and gender raises the chance of the successful candidate being an outsider, whereas similar educational backgrounds reduce the chance that the appointee comes from outside. When we examine performance effects, we find weak evidence that social ties are associated with reduced profitability.

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

JEL Classification: G21, G32, G34, J16

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 (2011). Bundesbank Series 2 Discussion Paper No. 2011,18. Available at SSRN: https://ssrn.com/abstract=2794074

Allen N. Berger (Contact Author)

University of South Carolina - Darla 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
Frankfurt/Main, 60431
Germany

Michael Koetter

Halle Institute for Economic Research ( email )

P.O. Box 11 03 61
Kleine Maerkerstrasse 8
D-06017 Halle, 06108
Germany

HOME PAGE: http://www.iwh-halle.de/en/about-the-iwh/people/detail/michael-koetter/

Klaus Schaeck

University of Bristol ( email )

University of Bristol,
Senate House, Tyndall Avenue
Bristol, BS8 ITH
United Kingdom

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