"Firm social networks, trust, and security issuances" by Ming Fang, Iftekhar Hasan et al.
 

Firm social networks, trust, and security issuances

Document Type

Article

Publication Date

1-1-2022

Abstract

We observe that public firms are more likely to issue seasoned stocks rather than bonds when theirs boards are more socially-connected. These connected issuers experience better announcement-period stock returns and attract more institutional investors. This social-connection effect is stronger for firms with severe information asymmetry, higher risk of being undersubscribed, and more visible to investors. Our conjecture is this social-network effect is driven by trust in issuing firms. Given stocks are more sensitive to trust, these trusted firms are more likely to issue stocks than bonds. Trustworthiness plays an important role in firms’ security issuances in capital markets.

Identifier

85089292361 (Scopus)

Publication Title

European Journal of Finance

External Full Text Location

https://doi.org/10.1080/1351847X.2020.1803095

e-ISSN

14664364

ISSN

1351847X

First Page

514

Last Page

549

Issue

4-5

Volume

28

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