학회소식
[2018년 제 4차] CEO Connectedness and the Cost of Capital
작성자 : 관리자
조회수 : 47
게시일 :
2018-12-14
A larger CEO network can reduce cost of capital by reducing information asymmetry between the
firm and outsiders, and increase trust between the firm and other firms or stakeholders.
Alternatively, a larger network can increase cost of capital because the higher CEO connectedness
reduces the costs to the CEO of being fired, which encourages greater agency problems and higher
risk decisions. We find a positive relation between CEO’s connectedness and the firm’s cost of
equity, suggesting that the costs, on average, outweigh the benefits. The positive relation between
CEO connections and cost of capital is attenuated for firms with high information asymmetry,
consistent with the beneficial effects of improved information flow mitigating some of the adverse
effects from agency costs and risk-taking. We use multiple ways to handle endogeneity and reverse
causality problems, and our results are generally robust.
