Abstract
This paper investigates the effects of CEO’s social network on bank risk-taking. We document a positive relation between bank CEO’s social connections and bank risks. To address the endogeneity concerns, we use deaths and retirements within networks to perform a difference-in-difference analysis, and find robust results. We also report that well-connected bank CEOs take more risk when more of their social ties are linked to informationally opaque firms and when the labor market offers fewer employment options. In addition, diversity of social ties (professional and educational) helps to mitigate the impact on risk. Finally, this study reveals an inefficient trade-off between bank risk and return, suggesting that executive social networks lead to excessive bank risk.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
