Social Networks in the Boardroom
AbstractThis paper provides empirical evidence consistent with the facts that (1) social networks may strongly affect board composition and (2) social networks may be detrimental to corporate governance. Our empirical investigation relies on a unique dataset on executives and outside directors of corporations listed on the Paris stock exchange over the 1992-2003 period. This data source is a matched employer employee dataset providing both detailed information on directors/CEOs and information on the firm employing them. We first find a very strong and robust correlation between the CEO's network and that of his directors. Networks of former high ranking civil servants are the most active in shaping board composition. Our identification strategy takes into account (1) differences in unobserved directors 'abilities' and (2) the unobserved propensity of firms to hire directors from particular networks, irrespective of the CEO's identity. We then show that the governance of firms run by former civil servants is relatively worse on many dimensions. Former civil servants are less likely to leave their CEO job when their firm performs badly. Secondly, CEOs who are former bureaucrats are more likely to accumulate directorships, and the more they do, the less profitable is the firm they run. Thirdly, the value created by acquisitions made by former bureaucrats is lower. All in all, these firms are less profitable on average.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 5496.
Date of creation: Feb 2006
Date of revision:
Contact details of provider:
Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ.
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
Other versions of this item:
- Kramarz, Francis & Thesmar, David, 2006. "Social Networks in the Boardroom," IZA Discussion Papers 1940, Institute for the Study of Labor (IZA).
- Kramarz, Francis & Thesmar, David, 2007. "Social Networks in The Boardroom," CEI Working Paper Series 2006-20, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
- G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
- J44 - Labor and Demographic Economics - - Particular Labor Markets - - - Professional Labor Markets and Occupations
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-02-19 (All new papers)
- NEP-BEC-2006-02-19 (Business Economics)
- NEP-CSE-2006-02-19 (Economics of Strategic Management)
- NEP-FIN-2006-02-19 (Finance)
- NEP-SOC-2006-02-19 (Social Norms & Social Capital)
You can help add them by filling out this form.
Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:CitEc Project, subscribe to its RSS feed for this item.
- Chiraz Ben Ali & Frédéric Teulon, 2014. "CEO Monitoring and board effectiveness - Resolving CEO compensation issue," Working Papers 2014-045, Department of Research, Ipag Business School.
- Perihan Ozge Saygin & Andrea Weber & Michèle A. Weynandt, 2014.
"Coworkers, Networks, and Job Search Outcomes,"
NRN working papers
2014-06, The Austrian Center for Labor Economics and the Analysis of the Welfare State, Johannes Kepler University Linz, Austria.
- Renée Adams & Benjamin E. Hermalin & Michael S. Weisbach, 2008.
"The Role of Boards of Directors in Corporate Governance: A Conceptual Framework and Survey,"
NBER Working Papers
14486, National Bureau of Economic Research, Inc.
- Renee B. Adams & Benjamin E. Hermalin & Michael S. Weisbach, 2010. "The Role of Boards of Directors in Corporate Governance: A Conceptual Framework and Survey," Journal of Economic Literature, American Economic Association, vol. 48(1), pages 58-107, March.
- Adams, Renee & Hermalin, Benjamin E. & Weisbach, Michael S., 2009. "The Role of Boards of Directors in Corporate Governance: A Conceptual Framework and Survey," Working Paper Series 2008-21, Ohio State University, Charles A. Dice Center for Research in Financial Economics.
- Zudenkova, Galina, 2011.
"Cronyism in Business, Public Sector and Politics,"
2072/151814, Universitat Rovira i Virgili, Department of Economics.
- Clare Leaver & Jordi Blances i Vidal, 2007. "Behaviour in Networks of Collaborators: Theory and Evidence from the English Judiciary," Economics Series Working Papers 354, University of Oxford, Department of Economics.
- Bramoullé, Y. & Goyal, S., 2009.
Cambridge Working Papers in Economics
0942, Faculty of Economics, University of Cambridge.
- Erich Battistin & Clara Graziano & G. Parigi, 2008. "Connections and Performance in Bankers' Turnover: Better Wed over the Mixen than over the Moor," CESifo Working Paper Series 2439, CESifo Group Munich.
- Ponzo, Michela & Scoppa, Vincenzo, 2010.
"The use of informal networks in Italy: Efficiency or favoritism?,"
Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics),
Elsevier, vol. 39(1), pages 89-99, January.
- Ponzo, Michela & Scoppa, Vincenzo, 2009. "The Use of Informal Networks in Italy: Efficiency or Favoritism?," MPRA Paper 17281, University Library of Munich, Germany.
- Braggion, F., 2008. "Managers, Firms and (Secret) Social Networks: The Economics of Freemasonry," Discussion Paper 2008-36, Tilburg University, Center for Economic Research.
- Ponzo, Michela & Scoppa, Vincenzo, 2011. "A simple model of favouritism in recruitment," Research in Economics, Elsevier, vol. 65(2), pages 78-88, June.
- Spagnolo, Giancarlo & Lippert, Steffen, 2004.
"Networks of Relations,"
Working Paper Series in Economics and Finance
570, Stockholm School of Economics, revised 03 May 2005.
- Lippert, Steffen & Spagnolo, Giancarlo, 2011. "Networks of relations and Word-of-Mouth Communication," Games and Economic Behavior, Elsevier, vol. 72(1), pages 202-217, May.
- Lippert, Steffen & Spagnolo, Giancarlo, 2005. "Networks of Relations and Social Capital," CEPR Discussion Papers 5078, C.E.P.R. Discussion Papers.
- Giancarlo Spagnolo & Steffen Lippert, 2004. "Networks of Relations," Econometric Society 2004 North American Winter Meetings 496, Econometric Society.
- Lippert, Steffen & Spagnolo, Giancarlo, 2004. "Networks of Relations," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 28, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
- Stuart, Toby E. & Yim, Soojin, 2010. "Board interlocks and the propensity to be targeted in private equity transactions," Journal of Financial Economics, Elsevier, vol. 97(1), pages 174-189, July.
- Lars Calmfors & Giancarlo Corsetti & Michael P. Devereux & Seppo Honkapohja & Gilles Saint-Paul & Hans-Werner Sinn & Jan-Egbert Sturm & Xavier Vives, 2007. "Chapter 6: Economic nationalism," EEAG Report on the European Economy, CESifo Group Munich, vol. 0, pages 133-147, 02.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.