We examine whether managerial social capital, defined as aggregate benefits of social obligations and informal contacts accrued through social connections, influences gender pay gaps. Consistent with homophily, the tendency to bond and interact with others of similar type, we find a positive association between connections of male executives and compensation. However, these social ties do not enhance firm performance more than connections of female executives. We also demonstrate that connections reduce pay-for-performance sensitivity of male executives. Finally, we document a manifestation of homophily in other corporate decisions. Our findings are robust to model specifications and adjustments for potential endogeneity.

Proponents of environmental policies based on liability assert that strict liability imposed on polluters induces firms to handle hazardous wastes properly. We examine unintended pollution releases, relating them to the liability imposed on polluters by state mini-Superfund laws. We find that strict liability reduces the frequency and severity of pollution releases, but that its effects vary with firm size. Smaller firms are associated with more pollution releases in states with strict liability, suggesting that in these states smaller firms may have specialized in riskier production processes. Their number, however, has not necessarily grown in response to the state's liability policy.