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Managers, Firms and (Secret) Social Networks: The Economics of Freemasonry

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Author Info
Braggion, F. (Tilburg University, Center for Economic Research)

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Abstract

This paper studies the relationships between managers? a? liations with Freema- sonry and companies' performance. Using a unique data set of 410 companies quoted on the London Stock Exchange between 1895 and 1902, I find that Masonic managers were associated with greater access to credit in small and young companies whose se- curities where traded over the counter. These companies earned higher profits, but the effect is not statistically significant. On the other hand, large publicly quoted corpora- tions that were managed by Freemasons did not obtain greater access to credit; they had lower profiys and lower Tobin's Q. These findings help to understand how social networks are related to companies' performances. Although social networks help to resolve agency problems between lenders and borrowers in firms that have difficulties in obtaining debt finance, in larger publicly quoted companies they are associated with worse agency conflicts between managers and shareholders and with worse economic performance.

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Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 2008-36.

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Date of creation: 2008
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Handle: RePEc:dgr:kubcen:200836

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Find related papers by JEL classification:
G30 - Financial Economics - - Corporate Finance and Governance - - - General
G39 - Financial Economics - - Corporate Finance and Governance - - - Other
N23 - Economic History - - Financial Markets and Institutions - - - Europe: Pre-1913

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