Template-type: ReDIF-Paper 1.0
Author-Name: Yiwei Fang 
Author-Name: Iftekhar Hasan
Author-Name: LiuLing Liu 
Author-Name: Haizhi Wang
Title: Do Social Networks Encourage Risk-Taking? Evidence from Bank CEOs
Abstract: This paper studies how CEO social networks affect bank risk-taking. Using a sample of 481 publicly traded U.S. banks, we find that bank risk increases with CEOs’ social networks. Our results are robust with a bank fixed-effects model and a difference-in-difference approach, as well as with various alternative bank risk measures. Alternative explanations such as corporate governance, managerial ownership, compensation, or CEO ability do not drive the findings. We evaluate potential channels through which social networks affect bank risk and find that CEO social networks increase bank risk more when banks face opaque information environments, when CEO job market conditions worsen, and when there are higher odds of group-think mentality in the networks. We further find that social networks present banks with an inefficient trade-off between risk and return, showing a “dark side” of social networks.
Classification-JEL:  L14, G21, G31
Keywords: Risk-taking, social networks, bank CEOs 
Length: 37 pages 
Number: 1641
Creation-Date: 2016
File-URL: https://repec.unibocconi.it/baffic/baf/papers/cbafwp1641.pdf
File-Format: application/pdf
File-Size: 234
Handle: RePEc:baf:cbafwp:cbafwp1641