We investigate the impact of CEO network centrality, a central position in a social network, on bank risk. Using a sample of 471 bank holding companies (BHCs) in the US from 1999 to 2018, we find that CEO network centrality is negatively related to bank risk and this is due to CEOs with higher levels of network centrality implementing less risky policies. Additionally, we find that information flow and CEO power are two channels through which CEO network centrality reduces bank risk. Our empirical results still hold when we employ a battery of methods to mitigate endogeneity issues. Our research further extends a new strand of studies focusing on the specific position/hierarchy of executives/directors in a social network.

We examine how women on boards influence bank earnings management. Using the likelihood of a board appointing women directors based on a Blau index of gender diversity in each director's total employment connections outside our sample banks for identification, we find an inverted U-shaped relation between women on boards and bank earnings management. Specifically, when there exists only a marginal number of women directors, banks are more likely to manipulate earnings. But, when the number of women directors reaches three or more, bank earnings management declines. This inverted U-shaped impact is intensified if women sit on audit or nomination committees, is moderated if women directors have higher education levels and more board experience, and is unchanged during the 2007–2009 financial crisis. Our results hold when we use alternative measures of bank earnings management, employ GMM estimations and test for alternative hypotheses for the inverted U-shaped relation.