CFO social capital and private debt
Tomas Jandik and
William R. McCumber
Journal of Corporate Finance, 2018, vol. 52, issue C, 28-52
The cost and terms of private debt are affected by the social capital of the borrowing firm's chief financial officer (CFO), proxied by measures of social network centrality that identify the relative position of CFO in the hierarchy of executives. Firms with CFOs possessing higher social capital issue new loans with lower spreads and fewer covenant restrictions, controlling for all direct connections between borrowers and lenders. Spread reductions are stronger for opaque firms and when CFOs lack objective reputation verification. The results hold when controlling for CFO personal characteristics and firm attributes related to network centrality.
Keywords: Social capital; Network centrality; Debt contracting; Loan spreads; Debt covenants; Chief financial officer (search for similar items in EconPapers)
JEL-codes: G32 L14 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:52:y:2018:i:c:p:28-52
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