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Do Social Networks of Listed Companies Help Companies Recover from Financial Crises?

Author

Listed:
  • Szu-Hsien Lin

    (Department of Accounting and Information Systems, Asia University, Taichung 41354, Taiwan)

  • Tzu-Pu Chang

    (Department of Finance, National Yunlin University of Science and Technology, Yunlin 64002, Taiwan)

  • Huei-Hwa Lai

    (Department of Business Administration, Chaoyang University of Technology, Taichung 413310, Taiwan)

  • Zi-Ying Lu

    (Department of Finance, National Yunlin University of Science and Technology, Yunlin 64002, Taiwan)

Abstract

This study aims to examine how the social networks of top management affect the recovery of their companies when facing a financial crisis. We mainly use the logit and Cox regression models to investigate whether social networks help overcome the financial distress and shorten the crisis duration. The empirical findings suggest that companies with characteristics of low degree centrality of the chairman’s bank networks and high closeness centrality of the general manager’s general networks and bank networks are more likely to overcome financial distress and get back to normal status. Furthermore, for companies with characteristics of low degree centrality of the chairman’s personal general networks, low closeness centrality of the financial executive’s personal general networks, and high degree centrality of the financial executive’s personal bank networks, it was easier to shorten the crisis duration. The practical implication is that companies need to prioritize quality over quantity in order to survive or shorten the crisis. All company top managers should not look only at the size of the company but consider how the social network is configured.

Suggested Citation

  • Szu-Hsien Lin & Tzu-Pu Chang & Huei-Hwa Lai & Zi-Ying Lu, 2022. "Do Social Networks of Listed Companies Help Companies Recover from Financial Crises?," Sustainability, MDPI, vol. 14(9), pages 1-23, April.
    • Handle: RePEc:gam:jsusta:v:14:y:2022:i:9:p:5044-:d:800036
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    1. Xiangxing Tao & Mingxin Wang & Yanting Ji, 2023. "The Application of Graph-Structured Cox Model in Financial Risk Early Warning of Companies," Sustainability, MDPI, vol. 15(14), pages 1-16, July.

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