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More than connectedness: Heterogeneity of CEO social network and firm value

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  • Fang, Yiwei
  • Francis, Bill
  • Hasan, Iftekhar

Abstract

This paper examines through various channels the effects of CEO social network heterogeneity on firm value. We construct four measures of heterogeneity based on demographic attributes, intellectual backgrounds, professional experience, and geographical exposures of individuals in the CEO social network. We find that CEO social network heterogeneity leads to higher Tobin's Q of firms. Greater CEO social network heterogeneity also leads to: (i) more innovation, (ii) more foreign sales growth, (iii) higher investment sensitivity to Tobin's Q, and (iv) better M&A performance. Overall, our results indicate that CEO social network heterogeneity is an aspect of CEO social capital and soft skills that deserves the attention of shareholders.

Suggested Citation

  • Fang, Yiwei & Francis, Bill & Hasan, Iftekhar, 2012. "More than connectedness: Heterogeneity of CEO social network and firm value," Bank of Finland Research Discussion Papers 26/2012, Bank of Finland.
    • Handle: RePEc:zbw:bofrdp:rdp2012_026
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    More about this item

    Keywords

    CEO; social networks; corporate finance policy decisions; firm value;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
    • Z10 - Other Special Topics - - Cultural Economics - - - General

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