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Differences Make a Difference: Diversity in Social Learning and Value Creation

Prior research has demonstrated that CEOs learn privileged information from their social connections. Going beyond the importance of the number of social ties in a CEO's social network, this paper studies the value generated from a diverse social environment. We construct an index of social-network heterogeneity (SNH) that captures the extent to which CEOs are connected to people of different demographic attributes and skill sets. We find that higher CEO SNH leads to greater firm value through the channels of better corporate innovation and diversified M&As. Overall, the evidence suggests that CEOs' exposure to human diversity enhances social learning and creates greater growth opportunities for firms.

01. February 2018

Authors Yiwei Fang Bill Francis Iftekhar Hasan

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Professor Iftekhar Hasan, PhD
Professor Iftekhar Hasan, PhD
Economist

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