From fiction to fact: the impact of CEO social networks

Thomas Kirchmaier and Konstantinos Stathopoulos

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: This paper investigates the relationship between a CEO’s social network, firm identity, and firm performance. There are two competing theories that predict contradictory outcomes. Following social network theory, one would expect a positive relation between social networks and firm performance, while agency theory in general and Bebchuk’s managerial power approach in particular predicts a negative relationship between social networks and firm performance. Based on a new and comprehensive measure of CEOs social networks, we observe for 363 non-financial firms in the UK that the size of a CEO’s social network affects firm performance negatively. Even so, growth companies are actively seeking CEOs with a large social network, which is in line with the social network theory. Still, we find evidence in support of the argument that well-connected CEOs use the power they obtain through their social network to the detriment of shareholders.

Keywords: CEO; boards of directors; social network; accounting performance (search for similar items in EconPapers)
JEL-codes: G34 L25 Z13 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2008-01-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:24427

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