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Productivity, managers’ social connections and the financial crisis

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  • Hasan, Iftekhar
  • Manfredonia, Stefano

Abstract

This paper investigates whether managers’ personal connections help corporate productivity to recover after a negative economic shock. Leveraging the heterogeneity in the severity of the financial crisis across different sectors, the paper reports that (i) the financial crisis had a negative effect on within-firm productivity, (ii) the effect was long-lasting and persistent, supporting a productivity-hysteresis hypothesis, and (iii) managers’ personal connections allowed corporations to recover from this productivity slowdown. Among the possible mechanisms, we show that connected managers operating in affected sectors foster productivity recovery through higher input cost efficiency and better access to the credit market, as well as more efficient use of labour and capital.

Suggested Citation

  • Hasan, Iftekhar & Manfredonia, Stefano, 2022. "Productivity, managers’ social connections and the financial crisis," Journal of Banking & Finance, Elsevier, vol. 141(C).
    • Handle: RePEc:eee:jbfina:v:141:y:2022:i:c:s0378426622000942
    DOI: 10.1016/j.jbankfin.2022.106497
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    JEL classification:

    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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