مرکزیت شبکه مدیرعامل و رتبه بندی اوراق قرضه
Abstract
1- Introduction
2- Literature review and hypothesis development
3- Research design
4- Main results
5- Additional tests
6- Conclusion Data availability
References
Abstract
This study examines the impact of Chief Executive Officer (CEO) network centrality on bond ratings at the firm level. Using multiple dimensions of social connectedness, we find a significant positive relation between CEO network centrality and bond ratings, suggesting that firms with better connected CEOs are more likely to receive high bond ratings. Our results still hold after a battery of additional tests. We also find that firms with better connected CEOs experience lower cost of debt. Overall, our study supports the notion in social science research that well-connected individuals can bring benefits to their firms.
Introduction
The sequential rank order tournament theory (i.e., Lazear & Rosen, 1981; Knoeber, 1989; Becker & Huselid, 1992; Knoeber & Thurman, 1994; Lazear, 1999; Connelly, Tihanyi, Crook, & Gangloff, 2014) states that an organization's hierarchy is modeled as a multiple-stage and winner-take-all tournament and the Chief Executive Officer (CEO) is the ultimate winner, suggesting that the CEO is the best performer and perhaps the most influential individual in the organization. Given the importance of a CEO, recent years have witnessed a rapidly increasing interest in whether and how CEO characteristics and performance contribute to firm performance and other outcomes. In particular, CEO network centrality, an important CEO characteristic, has received tremendous attention in recent accounting and finance literature. The purpose of our study is to investigate the impact of CEO network centrality on bond credit ratings at the firm level. CEO network centrality refers to the degree of centrality of a CEO's position in a social network hierarchy. A high centrality CEO is regarded as a socially well-connected CEO. Recent research has focused on the impact of having high centrality CEOs on various firm-level outcomes, and it is still not clear whether having such CEOs can lead to positive outcomes. Some studies argue that high centrality CEOs can have better access to valuable and even private information, relative to low centrality CEOs. This information advantage may lead to positive outcomes for firms with well-connected CEOs. Furthermore, Tsai and Ghoshal (1998) argue that social capital, largely derived from social ties in a network, can improve a firm's ability to create value, suggesting a positive relation between social ties and firm performance.