From Fiction to Fact: The Impact of CEO Social Networks

This paper investigates the relationship between a CEO’s social network, firm identity, andfirm performance. There are two competing theories that predict contradictory outcomes.Following social network theory, one would expect a positive relation between social networksand firm performance, while agency theory in general and Bebchuk’s managerial powerapproach in particular predicts a negative relationship between social networks and firmperformance. Based on a new and comprehensive measure of CEOs social networks, weobserve for 363 non-financial firms in the UK that the size of a CEO’s social network affectsfirm performance negatively....