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Executive Network Centrality and Corporate Reporting

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  • Jing He

    (Department of Accounting and Management Information Systems, University of Delaware, Newark, Delaware 19716)

Abstract

This paper investigates the association of corporate reporting and executive network centrality, which measures an executive’s relative position in a massive network consisting of outside corporate leaders. I find that high-centrality chief executive officers (CEOs) and chief financial officers (CFOs) are generally more likely to engage in financial misreporting than low-centrality CEOs and CFOs. I also find that the influence of CFO network centrality is greater than that of CEOs in financial misreporting. Further analyses show that the monitoring effect of internal governance mechanisms on high-centrality executives is very limited and that the discipline of the managerial labor market is weaker for high-centrality CFOs as well. My results hold for a subsample subject to exogenous shocks to CFO connectedness and are robust to a series of alternative specifications including using CFO fixed effects. Taken together, my findings suggest that corporate reporting can be influenced by executives’ social network position, with high-centrality CFOs using their social power to make adverse corporate reporting decisions to gain personal benefits.

Suggested Citation

  • Jing He, 2022. "Executive Network Centrality and Corporate Reporting," Management Science, INFORMS, vol. 68(2), pages 1512-1536, February.
    • Handle: RePEc:inm:ormnsc:v:68:y:2022:i:2:p:1512-1536
    DOI: 10.1287/mnsc.2020.3924
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    2. Tang, Linjia & Guo, Yingying & Zha, Jianfeng & Zheng, Weiwei, 2024. "Acquiescence or Redemption: CEO’s early-life experience of environmental pollution and corporate green innovation," Journal of Business Research, Elsevier, vol. 173(C).
    3. 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).

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