报告：Divisional Managers’ External Social Connections and Capital Investment
摘要：Information is a vital resource enabling firms to make efficient capital investment. We establish evidence of a causal relation between information and capital investment at the divisional level within a multi-divisional firm, using external social connections of division managers (DM) as an information source. We find that DMs who are socially connected with the CEOs of other firms in the same industries receive more capital investment than those who do not have such connections. The effect of external social connections is more pronounced (i) when the information source is of higher quality, proxied by external firms connected with the DM displaying superior performance or their CEOs having had a longer tenure on the post, (ii) when the industry environment in which the division operates is more uncertain, and (iii) when the DM’s own firm’s CEO is less informed about the division. The effect is further enhanced where the DM serves a more influential role within the firm. Further analysis indicates that the increased investment level resulting from external social connections is accompanied by improvements in investment efficiency and subsequent performance. Our results are robust to controlling for the DM’s inherent ability, the DM’s social ties with the own firm’s CEO, and the external social connections of the own firm’s CEO.