NETWORKS AS PIPES AND PRISMS OF THE CEO: EFFECTS OF INDIVIDUAL NETWORKS OF NEWLY APPOINTED CEOs ON FIRM PERFORMANCE
Journal Title: European Journal of Business and Social Sciences - Year 2015, Vol 4, Issue 5
Abstract
While much of the academic literature expresses scepticism about managers’ direct influence on the performance of their firms, recent literature suggests that visible, celebrated and well-connected chief executive officers (CEOs) may even be stimulated to hurt their companies. To address these claims, the study examined the relationship between the individual networks of newly appointed CEOs of large corporations and the subsequent performance of these firms. Building on the conception of networks as pipes and prisms and the idea that networks of organizational members may have organizational consequences, the performance implications of two dimensions of individual networks of incoming CEOs: density of networks of ties to board members of public and private companies, and CEO prominence are addressed. The study found that network density is inconsequential for performance, while CEO prominence has negative effect on firm’s stock market performance. In addition, the findings showed that large individual networks may be a mixed blessing: they are associated with positive operating performance of firms, yet contribute to a discount of the firm’s stock price if the incoming CEO built them predominantly through memberships on corporate boards.
Authors and Affiliations
Vlatka Skokic| Faculty of Business, Economics & Law, University of Surrey, UK, Faculty of Business, Economics & Law, University of Surrey, GU2 7XH, Guildford, UK. Tel: 0044 1483 689758. eMail: v.skokic@surrey.ac.uk, Dejan Kruzic| University of Split, Faculty of Economics, Split, Croatia, Faculty of Business, Economics & Law, University of Surrey, GU2 7XH, Guildford, UK. Tel: 0044 1483 689758. eMail: v.skokic@surrey.ac.uk, Marko Coh| Maxxim Consulting, London, UK, Faculty of Business, Economics & Law, University of Surrey, GU2 7XH, Guildford, UK. Tel: 0044 1483 689758. eMail: v.skokic@surrey.ac.uk
Keywords
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- EP ID EP10631
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