Date of Graduation

8-2024

Document Type

Dissertation

Degree Name

Doctor of Philosophy in Business Administration (PhD)

Degree Level

Graduate

Department

Finance

Advisor/Mentor

Jandik, Tomas

Committee Member

Hsu, Scott

Second Committee Member

Yeager, Timothy J.

Keywords

Networks; Gender dynamics; Corporate finance

Abstract

In my dissertation, I explore the effect of networks and gender dynamics on corporate finance. In my first essay, I examine the effects of personal network on insider trading decisions. Using COVID-19 as a shock to test personal network effect, I find individuals were influenced by information about COVID-19 provided by the members of their personal networks. S&P 1500 insiders whose personal networks contained higher fractions of socially connected individuals from countries affected by early stages of COVID-19 were more likely to sell shares of their firms in the period preceding the U.S. stock market decline, and they are less likely to buy during the decline compared with insiders with lower level of such connections. Sales of shares by managers with network exposure to COVID-19 information were likely motivated by the expected negative impact of the pandemic rather than negative news about their firms because post-sale abnormal returns are positive. In contrast, purchases of shares by connected managers were likely motivated by positive firm-specific news given the positive abnormal returns. However, U.S. insiders with foreign ties may not have been fully persuaded about the severity of the COVID-19 impact because they traded lower dollar volumes and smaller percentage stakes. In my second essay, I examine the gender promotion gap during the CEO nomination process using machine learning algorithm. I find machine learning algorithms (XGBoost) predict CEO performance better than BIC-selected OLS, and they are arguably more objective at selecting CEOs than company boards. I also show evidence of gender bias. Females are underrepresented in CEO positions and are less likely to be selected as CEOs. However, once selected, female CEOs outperform their male counterparts. Boards with poor corporate governance are more likely to make gender-biased decisions when selecting CEOs. On the other hand, higher representation of female directors at the board level mitigates gender bias. In my third essay, I investigate the gender spillover effect in supply chain, specifically, are customers with female executives more inclined to choose firms whose gender values align with their own when selecting suppliers? I find that customers with female executives tend to choose female-friendly firms indicated by higher female representation as actual suppliers, and the effect completely disappears when customers do not have female executives. Companies are more likely to hire additional female executives within three years after initiating business relationship if they themselves have a higher number of female executives and establish connections with customers who also have female executives. Female friendly culture benefits both suppliers and customers. Suppliers with a higher percentage of female executives are associated with higher operating efficiency and better firm valuation. Customers with a greater representation of female executives are associated with better corporate governance and lower financial constraint. Overall, this study highlights the role of female executives in building supply chain relationships.

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