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Does the Rolodex Matter? Corporate Elite's Small World and the Effectiveness of Boards of Directors

Management Science, 58 (2), Pages 236-252, February 2012

EFA 2006 Zurich Meetings Paper, WFA 2007 Big Sky Resort Meetings Paper

34 Pages Posted: 15 Mar 2006 Last revised: 28 Apr 2012

Bang Dang Nguyen

University of Cambridge Judge Business School

Date Written: February 26, 2011

Abstract

This paper investigates the impact of social ties on the effectiveness of boards of directors. When the CEO and a number of directors belong to the same social networks, the CEO is less likely to be dismissed for poor performance. The results are robust to different measures of performance and networks, consistent after controlling for CEO ability, and not due to connected boards’ superior information. Socially connected CEOs are also more likely to find new and better employment after a forced departure. Evidence from the paper suggests that close social ties among board members impact the workings of the board of directors.

Keywords: Social Ties, CEO Turnover to Performance, Board of Directors, Corporate Governance

JEL Classification: G3, G30

Suggested Citation

Nguyen, Bang Dang, Does the Rolodex Matter? Corporate Elite's Small World and the Effectiveness of Boards of Directors (February 26, 2011). EFA 2006 Zurich Meetings Paper, WFA 2007 Big Sky Resort Meetings Paper. Available at SSRN: https://ssrn.com/abstract=864184 or http://dx.doi.org/10.2139/ssrn.864184

Bang Dang Nguyen (Contact Author)

University of Cambridge Judge Business School ( email )

Trumpington Street
Cambridge, CB2 1AG
United Kingdom
+44 122 376 0470 (Phone)
+44 1223 339701 (Fax)

HOME PAGE: http://www.jbs.cam.ac.uk/research/faculty/nguyenbd.html

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