Differences make a difference: Diversity in social learning and value creation

Yiwei Fang; Bill Francis; Iftekhar Hasan

doi:10.1016/j.jcorpfin.2017.11.015

Journal of Corporate Finance Vol. 48 2018

Differences make a difference: Diversity in social learning and value creation

Yiwei Fang¹; Bill Francis²; Iftekhar Hasan^3,4,5

¹ Illinois Institute of Technology · ² Rensselaer Polytechnic Institute · ³ Bank of Finland · ⁴ Fordham University · ⁵ University Bank

Abstract

Prior research has demonstrated that CEOs learn privileged information from their social connections. Going beyond the importance of the number of social ties in a CEO's social network, this paper studies the value generated from a diverse social environment. We construct an index of social-network heterogeneity (SNH) that captures the extent to which CEOs are connected to people of different demographic attributes and skill sets. We find that higher CEO SNH leads to greater firm value through the channels of better corporate innovation and diversified M&As. Overall, the evidence suggests that CEOs' exposure to human diversity enhances social learning and creates greater growth opportunities for firms.

DOI: 10.1016/j.jcorpfin.2017.11.015
Volume: 48
Pages: 474-491
Language: en
Sources: openalex crossref bibtex:phds-export.bib

Differences make a difference: Diversity in social learning and value creation

Abstract

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