← Search

Journal of Corporate Finance Vol. 52 2018

CFO social capital and private debt

Kathy Fogel1; Tomas Jandik2; William R. McCumber3

1 Zinoplex and Eupheus One, United States of America · 2 Sam M. Walton College of Business, University of Arkansas, United States of America · 3 Louisiana Tech University

Abstract

The cost and terms of private debt are affected by the social capital of the borrowing firm's chief financial officer (CFO), proxied by measures of social network centrality that identify the relative position of CFO in the hierarchy of executives. Firms with CFOs possessing higher social capital issue new loans with lower spreads and fewer covenant restrictions, controlling for all direct connections between borrowers and lenders. Spread reductions are stronger for opaque firms and when CFOs lack objective reputation verification. The results hold when controlling for CFO personal characteristics and firm attributes related to network centrality.

DOI
10.1016/j.jcorpfin.2018.07.001
Volume
52
Pages
28-52
Language
en
Sources
bibtex:phds-export.bib crossref openalex

Cite