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Executive Network Centrality and Stock Liquidity

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  • Jared F. Egginton
  • William R. McCumber

Abstract

We examine the relationship between stock market liquidity and the network centrality of firm executives. We find that firms whose executive officers are more central in the network of executives have narrower bid‐ask spreads. We use an exogenous network centrality shock of executive turnover and report that liquidity improves after firms hire executives with greater centrality. We present evidence that improved liquidity is attributable to efficient information flows around executives in more advantageous network positions.

Suggested Citation

  • Jared F. Egginton & William R. McCumber, 2019. "Executive Network Centrality and Stock Liquidity," Financial Management, Financial Management Association International, vol. 48(3), pages 849-871, September.
    • Handle: RePEc:bla:finmgt:v:48:y:2019:i:3:p:849-871
    DOI: 10.1111/fima.12237
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    Cited by:

    1. Tinic, Murat & Sensoy, Ahmet & Demir, Muge & Nguyen, Duc Khuong, 2020. "Broker Network Connectivity and the Cross-Section of Expected Stock Returns," MPRA Paper 104719, University Library of Munich, Germany.
    2. Pham, Mia Hang, 2020. "In law we trust: Lawyer CEOs and stock liquidity," Journal of Financial Markets, Elsevier, vol. 50(C).
    3. Huang, Can & Huang, Hung-Yi & Ho, Kung-Cheng, 2024. "Media coverage and stock liquidity: Evidence from China," International Review of Economics & Finance, Elsevier, vol. 89(PA), pages 665-682.
    4. Krishnamurti, Chandrasekhar & Chowdhury, Hasibul & Han, Hien Duc, 2021. "CEO centrality and stock price crash risk," Journal of Behavioral and Experimental Finance, Elsevier, vol. 31(C).
    5. Wang, Kai & Li, Tingting & San, Ziyao & Gao, Hao, 2023. "How does corporate ESG performance affect stock liquidity? Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 80(C).
    6. Wang, Shusheng & Yan, Yan & Li, Haitong & Wang, Baolin, 2024. "Whom you know matters: Network structure, industrial environment and digital orientation," Technological Forecasting and Social Change, Elsevier, vol. 206(C).
    7. Nandy, Monomita & Lodh, Suman & Kaur, Jaskaran & Wang, Jin, 2020. "Impact of directors' networks on corporate social responsibility: A cross country study," International Review of Financial Analysis, Elsevier, vol. 72(C).
    8. Yang, Xin & Jin, Cheng & Huang, Chuangxia & Yang, Xiaoguang, 2023. "Network characteristics and stock liquidity:Evidence from the UK," Finance Research Letters, Elsevier, vol. 53(C).
    9. Pham, Mia Hang & Merkoulova, Yulia & Veld, Chris, 2024. "Award-winning CEOs and corporate innovation," Journal of Banking & Finance, Elsevier, vol. 159(C).
    10. Farah, Nusrat & Islam, Md Shariful & Tadesse, Amanuel & McCumber, William, 2024. "Impact of audit committee social capital on the adoption of COSO 2013," Advances in accounting, Elsevier, vol. 64(C).
    11. Zhaoyang Li & Yuehan Yang, 2024. "Directed association network analysis on the Standard and Poor’s 500 Index," Computational Economics, Springer;Society for Computational Economics, vol. 63(1), pages 111-127, January.
    12. Fan, Yaoyao & Jiang, Yuxiang & Jin, Pengcheng & Mai, Yong, 2023. "CEO network centrality and bank risk: Evidence from US Bank holding companies," Journal of Corporate Finance, Elsevier, vol. 83(C).

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