Hiring Your Friends: Evidence from the Market for Financial Economists

Abstract

We study connections in academic hiring in a sample of finance doctoral graduates. Departments hire individuals with school connections to other recently hired faculty at a significantly greater rate than is expected. Similarly, schools exhibit an elevated propensity to hire individuals with names that indicate a similar ethnic background to incumbent department members. School-connected hires tend to publish at a significantly higher rate than expected, a finding that is robust to a large number of model modifications and is stronger in more research-intensive departments. The evidence on school connections appears highly consistent with an employer information benefit from hiring based on school connections. Ethnic-connected hires tend to publish at lower-than-predicted rates when controlling for hiring-school characteristics, but this finding is not robust to the inclusion of hiring-school fixed effects. This evidence suggests that the possible information benefits of school-connected hiring do not immediately extend to other types of connections.

Keywords: Referrals, connections, job matching, information, favoritism

JEL Classification: J20, J44, G00