Abstract
How do informal social ties among board directors influence corporate strategic investment decisions? Investigating internal social structure within corporate boards, we argue that boardroom segregation, defined as clustering of board members based on their social ties, reduces a company’s investment responsiveness and impedes its financial performance. We also argue that the negative effects of boardroom segregation will be mitigated by the presence of a CEO maintaining many social ties with board directors. Our theoretical model and hypotheses are tested using a sample of 46,292 firm-years from 1999-2013. The results suggest that CEOs may exert positive influences on board deliberations, in contrast to previous research that largely focuses on the influences of the board on top management and the negative effects of CEO-director connections.
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