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

No 2008-36, Discussion Paper from Tilburg University, Center for Economic Research

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.

JEL-codes: G30 G39 N23 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cfn, nep-net and nep-soc
Date: Written 2008
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