Social Embeddedness of Corporate Elites and Uncertainty in Financial Markets

Abstract

In the last decade regulatory pressure includes appeals that corporate elites should reduce their multiple directorships to a minimum. The functionality of this governance mechanism is suggested by agency theory. The embeddedness view counter-argues that social relationships matter for the effectiveness of corporate governance. In particular for ill-structured tasks like stock price valuation social networks solve fundamental coordination problems in markets by reducing the risks of market exchange, by establishing a common base of re Show more