From rivals to allies? CEO connections in an era of common ownership

Dennis Hutschenreiter and Qianshuo Liu

No 7 /2025, IWH Discussion Papers from Halle Institute for Economic Research (IWH)

Abstract: Institutional common ownership of firm pairs in the same industry increases the likelihood of a preexisting social connection among their CEOs. We establish this relationship using a quasi-natural experiment that exploits institutional mergers combined with firms' hiring events and detailed information on CEO biographies. In addition, for peer firms, gaining a CEO connection from a hiring firm's CEO appointment correlates with higher returns on assets, stock market returns, and decreasing product similarity between companies. We find evidence consistent with common owners allocating CEO connections to shape managerial decision-making and increase portfolio firms' performance.

Keywords: CEO appointments; CEO connections; common ownership; firm performance; product similarity (search for similar items in EconPapers)
JEL-codes: G23 G32 G34 L21 L22 (search for similar items in EconPapers)
Date: 2025
New Economics Papers: this item is included in nep-net and nep-sbm
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:iwhdps:319068

DOI: 10.18717/dpzgx5-7x90

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