CEO social connections and bank systemic risk: The “dark side” of social networks

Sylvester Adasi Manu and Yaxuan Qi ()

Journal of Banking & Finance, 2023, vol. 156, issue C

Abstract: This paper finds that banks led by socially connected CEOs have a higher degree of systemic risk compared to banks with less socially connected CEOs. To address endogeneity concerns, we employ a difference-in-differences design and the instrumental variable method using CEO death as an exogenous shock to the social network. Our study uncovers two key mechanisms through which CEO social networks impact bank systemic risk. First, banks governed by connected CEOs are more active in interbank transactions. Second, bank pairs featuring connected CEOs display a greater asset similarity in comparison to those without connected CEOs. These findings highlight the significant impact of CEO social connections on banks' interconnectedness and their potential contribution to systemic risk in the banking sector.

Keywords: Systemic risk; Social connections; Network centrality (search for similar items in EconPapers)
JEL-codes: D85 G21 G32 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0378426623001863
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:156:y:2023:i:c:s0378426623001863

DOI: 10.1016/j.jbankfin.2023.106988

Access Statistics for this article

Journal of Banking & Finance is currently edited by Ike Mathur

More articles in Journal of Banking & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().