IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Does it pay to have friends? Social ties and executive appointments in banking

Listed author(s):
  • Berger, Allen N.
  • Kick, Thomas
  • Koetter, Michael
  • Schaeck, Klaus

Social capital theory predicts individuals establish social ties based on homophily, i.e., affinities for similar others. We exploit a unique sample to analyze how similarities and social ties affect career outcomes in banking based on age, education, gender, and employment history to examine if homophily and connectedness increase the probability that the appointee to an executive board is an outsider (an individual without previous employment at the bank) compared to being an insider. Our results show that homophily based on age and gender raises the chance of the successful candidate being an outsider, whereas similar educational backgrounds reduce the chance that the appointee comes from outside. When we examine performance effects, we find weak evidence that social ties are associated with reduced profitability.

If 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.

File URL: https://www.econstor.eu/bitstream/10419/57783/1/715112015.pdf
Download Restriction: no

Paper provided by Deutsche Bundesbank, Research Centre in its series Discussion Paper Series 2: Banking and Financial Studies with number 2011,18.

as
in new window

Length:
Date of creation: 2011
Handle: RePEc:zbw:bubdp2:201118
Contact details of provider: Postal:
Postfach 10 06 02, 60006 Frankfurt

Phone: 0 69 / 95 66 - 0
Fax: 0 69 / 95 66 30 77
Web page: http://www.bundesbank.de/
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as
in new window


  1. Dahya, Jay & McConnell, John J., 2005. "Outside directors and corporate board decisions," Journal of Corporate Finance, Elsevier, vol. 11(1-2), pages 37-60, March.
  2. Hwang, Byoung-Hyoun & Kim, Seoyoung, 2009. "It pays to have friends," Journal of Financial Economics, Elsevier, vol. 93(1), pages 138-158, July.
  3. Harrison Hong & Jeffrey D. Kubik & Jeremy C. Stein, 2005. "Thy Neighbor's Portfolio: Word-of-Mouth Effects in the Holdings and Trades of Money Managers," Journal of Finance, American Finance Association, vol. 60(6), pages 2801-2824, December.
  4. Berger, Allen N. & Kick, Thomas & Schaeck, Klaus, 2012. "Executive board composition and bank risk taking," Discussion Papers 03/2012, Deutsche Bundesbank, Research Centre.
  5. Renee B. Adams & Hamid Mehran, 2003. "Is corporate governance different for bank holding companies?," Economic Policy Review, Federal Reserve Bank of New York, issue Apr, pages 123-142.
  6. Lang, Gunter & Welzel, Peter, 1999. "Mergers among German Cooperative Banks: A Panel-Based Stochastic Frontier Analysis," Small Business Economics, Springer, vol. 13(4), pages 273-286, December.
  7. Steven N. Kaplan, 1993. "Top Executives, Turnover and Firm Performance in Germany," NBER Working Papers 4416, National Bureau of Economic Research, Inc.
  8. International Monetary Fund, 2004. "Germany's Three-Pillar Banking System; Cross-Country Perspectives in Europe," IMF Occasional Papers 233, International Monetary Fund.
  9. Fafchamps, Marcel & van der Leij, J & Goyal, Sanjeev, 2006. "Matching and Network Effects," Economics Discussion Papers 8902, University of Essex, Department of Economics.
  10. Montgomery, James D, 1991. "Social Networks and Labor-Market Outcomes: Toward an Economic Analysis," American Economic Review, American Economic Association, vol. 81(5), pages 1407-1418, December.
  11. Yermack, David, 2006. "Flights of fancy: Corporate jets, CEO perquisites, and inferior shareholder returns," Journal of Financial Economics, Elsevier, vol. 80(1), pages 211-242, April.
  12. Borokhovich, Kenneth A. & Parrino, Robert & Trapani, Teresa, 1996. "Outside Directors and CEO Selection," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 31(03), pages 337-355, September.
  13. Benjamin E. Hermalin & Michael S. Weisbach, 2001. "Boards of Directors as an Endogenously Determined Institution: A Survey of the Economic Literature," NBER Working Papers 8161, National Bureau of Economic Research, Inc.
  14. Andres, Pablo de & Vallelado, Eleuterio, 2008. "Corporate governance in banking: The role of the board of directors," Journal of Banking & Finance, Elsevier, vol. 32(12), pages 2570-2580, December.
  15. Cannella Jr., Albert A. & Fraser, Donald R. & Lee, D. Scott, 1995. "Firm failure and managerial labor markets Evidence from Texas banking," Journal of Financial Economics, Elsevier, vol. 38(2), pages 185-210, June.
  16. Christiana Hilmer & Michael Hilmer, 2007. "Women Helping Women, Men Helping Women? Same-Gender Mentoring, Initial Job Placements, and Early Career Publishing Success for Economics PhDs," American Economic Review, American Economic Association, vol. 97(2), pages 422-426, May.
  17. Uri Gneezy & Aldo Rustichini, 2004. "Gender and competition at a young age," Framed Field Experiments 00151, The Field Experiments Website.
  18. Guiso, Luigi & Sapienza, Paola & Zingales, Luigi, 2000. "The Role of Social Capital In Financial Development," CEPR Discussion Papers 2383, C.E.P.R. Discussion Papers.
  19. Lauren Cohen & Andrea Frazzini & Christopher Malloy, 2008. "Sell Side School Ties," NBER Working Papers 13973, National Bureau of Economic Research, Inc.
  20. Agrawal, Anup & Knoeber, Charles R. & Tsoulouhas, Theofanis, 2006. "Are outsiders handicapped in CEO successions?," Journal of Corporate Finance, Elsevier, vol. 12(3), pages 619-644, June.
  21. Anil Shivdasani & David Yermack, 1999. "CEO Involvement in the Selection of New Board Members: An Empirical Analysis," Journal of Finance, American Finance Association, vol. 54(5), pages 1829-1853, October.
  22. Mark Granovetter, 2005. "The Impact of Social Structure on Economic Outcomes," Journal of Economic Perspectives, American Economic Association, vol. 19(1), pages 33-50, Winter.
  23. Lauren Cohen & Andrea Frazzini & Christopher Malloy, 2008. "The Small World of Investing: Board Connections and Mutual Fund Returns," Journal of Political Economy, University of Chicago Press, vol. 116(5), pages 951-979, October.
  24. 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.
  25. Bennedsen, Morten & Kongsted, Hans Christian & Nielsen, Kasper Meisner, 2008. "The causal effect of board size in the performance of small and medium-sized firms," Journal of Banking & Finance, Elsevier, vol. 32(6), pages 1098-1109, June.
  26. Avanidhar Subrahmanyam, 2008. "Social Networks and Corporate Governance," European Financial Management, European Financial Management Association, vol. 14(4), pages 633-662.
  27. Ronald C. Anderson & David M. Reeb & Arun Upadhyay & Wanli Zhao, 2011. "The Economics of Director Heterogeneity," Financial Management, Financial Management Association International, vol. 40(1), pages 5-38, 03.
  28. Koetter, M. & Bos, J.W.B. & Heid, F. & Kolari, J.W. & Kool, C.J.M. & Porath, D., 2007. "Accounting for distress in bank mergers," Journal of Banking & Finance, Elsevier, vol. 31(10), pages 3200-3217, October.
  29. Christa H. S. Bouwman, 2011. "Corporate Governance Propagation through Overlapping Directors," Review of Financial Studies, Society for Financial Studies, vol. 24(7), pages 2358-2394.
  30. Hermalin, Benjamin E & Weisbach, Michael S, 1998. "Endogenously Chosen Boards of Directors and Their Monitoring of the CEO," American Economic Review, American Economic Association, vol. 88(1), pages 96-118, March.
  31. Benjamin E. Hermalin & Michael S. Weisbach, 1988. "The Determinants of Board Composition," RAND Journal of Economics, The RAND Corporation, vol. 19(4), pages 589-606, Winter.
  32. Reint Gropp & Hendrik Hakenes & Isabel Schnabel, 2010. "Competition, Risk-Shifting, and Public Bail-out Policies," Working Papers 1003, Gutenberg School of Management and Economics, Johannes Gutenberg-Universität Mainz, revised 14 Jan 2010.
  33. Harald Hau & Marcel Thum, 2009. "Subprime Crisis and Board (In-)Competence: Private vs. Public Banks in Germany," CESifo Working Paper Series 2640, CESifo Group Munich.
  34. Denis, Diane K. & McConnell, John J., 2003. "International Corporate Governance," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 38(01), pages 1-36, March.
  35. Pathan, Shams & Skully, Michael, 2010. "Endogenously structured boards of directors in banks," Journal of Banking & Finance, Elsevier, vol. 34(7), pages 1590-1606, July.
  36. Agrawal, Anup & Chadha, Sahiba, 2005. "Corporate Governance and Accounting Scandals," Journal of Law and Economics, University of Chicago Press, vol. 48(2), pages 371-406, October.
  37. Bellucci, Andrea & Borisov, Alexander & Zazzaro, Alberto, 2010. "Does gender matter in bank-firm relationships? Evidence from small business lending," Journal of Banking & Finance, Elsevier, vol. 34(12), pages 2968-2984, December.
  38. Benjamin E. Hermalin, 2005. "Trends in Corporate Governance," Journal of Finance, American Finance Association, vol. 60(5), pages 2351-2384, October.
  39. Marmaros, David & Sacerdote, Bruce, 2002. "Peer and social networks in job search," European Economic Review, Elsevier, vol. 46(4-5), pages 870-879, May.
  40. Huson, Mark R. & Malatesta, Paul H. & Parrino, Robert, 2004. "Managerial succession and firm performance," Journal of Financial Economics, Elsevier, vol. 74(2), pages 237-275, November.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:zbw:bubdp2:201118. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - German National Library of Economics)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.