Executive Networks and Firm Policies: Evidence from the Random Assignment of MBA Peers

Kelley 

Wednesdays@NICO Seminar, Noon, October 17th, Chambers Hall, Lower Level

Prof. Kelly Shue, University of Chicago Booth Business School

Abstract

Using the historical random assignment of MBA students to sections at Harvard Business School, I explore how executive peer networks can affect managerial decision-making and firm policies. Within an HBS class, firm outcomes are significantly more similar among graduates from the same section than among graduates from different sections, with the strongest effects in executive compensation and acquisitions strategy. Both compensation and acquisitions propensities have elasticities of 10-20% with respect to the mean characteristics of section peers. I demonstrate the important role of ongoing social interactions by showing that peer effects are more than twice as strong in the year immediately following staggered alumni reunions. A variety of other tests suggest that peer influence can operate through direct reactions to peer outcomes in ways that do not necessarily contribute to firm productivity.

Bio

Kelly Shue joined Chicago Booth in 2011 as an Assistant Professor of Finance. Shue earned her PhD in Economics and her A.B. in Applied Mathematics (summa cum laude) from Harvard University. Her research interests include social networks, executive compensation, M&A, credit markets, and corporate social responsibility. Her current research explores the extent to which financial markets underreact to “no news,” i.e., the pure passage of time. Her work on executive social networks was awarded the 2012 Wharton School-WRDS Award for Best Empirical Finance Paper.