Executive Network Centrality and Corporate Reporting

56 Pages Posted: 3 Dec 2020

See all articles by Jing He

Jing He

University of Delaware

Date Written: November 12, 2020

Abstract

This paper investigates the association of corporate reporting and executive network centrality, which measures an executive’s relative position in a massive network consisting of outside corporate leaders. I find that high-centrality chief executive officers (CEOs) and chief financial officers (CFOs) are generally more likely to engage in financial misreporting than low-centrality CEOs and CFOs. I also find that the influence of CFO network centrality is greater than that of CEOs in financial misreporting. Further analyses show that the monitoring effect of internal governance mechanisms on high-centrality executives is very limited and that the discipline of the managerial labor market is weaker for high-centrality CFOs as well. My results hold for a subsample subject to exogenous shocks to CFO connectedness and are robust to a series of alternative specifications including using CFO fixed effects. Taken together, my findings suggest that corporate reporting can be influenced by executives’ social network position, with high-centrality CFOs using their social power and influence to make adverse corporate reporting decisions to gain personal benefits.

Keywords: social network centrality, financial reporting, corporate governance, managerial labor market

JEL Classification: M41

Suggested Citation

He, Jing, Executive Network Centrality and Corporate Reporting (November 12, 2020). Available at SSRN: https://ssrn.com/abstract=3734687 or http://dx.doi.org/10.2139/ssrn.3734687

Jing He (Contact Author)

University of Delaware ( email )

Newark, DE 19711
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
47
Abstract Views
255
PlumX Metrics