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Industry centrality: Weak ties, industry attributes, and managerial contracting

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  • Rasha Ashraf
  • Nishant Dass
  • Vikram Nanda

Abstract

Centrality in the network of interindustry trade relationships provides novel insights into an industry's economic attributes and managerial incentive contracts prevalent in the industry. More “central” industries trade with a large number of industries, implying numerous but relatively weaker interindustry ties. Weakness of interindustry ties suggests that relationship‐specific investment (RSI) will be less important and output will be relatively more commoditized in central industries. As predicted, central industry firms are less innovative, face greater competition, and have lower idiosyncratic risk. Further, CEOs in central industries receive lower pay and weaker incentives. Tournament incentives are also weaker in more central industries.

Suggested Citation

  • Rasha Ashraf & Nishant Dass & Vikram Nanda, 2022. "Industry centrality: Weak ties, industry attributes, and managerial contracting," Financial Management, Financial Management Association International, vol. 51(2), pages 663-699, June.
    • Handle: RePEc:bla:finmgt:v:51:y:2022:i:2:p:663-699
    DOI: 10.1111/fima.12380
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    References listed on IDEAS

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