Bitterle, Alexandra
[UCL]
Iania, Leonardo
[UCL]
That favoritism is a prevalent practice at workplace is common consent. It seems natural that people enjoy working with others whom they like, says Ryan Kahn, founder of The Hired Group (Forbes, 2013). And indeed what many already know from anecdotal experience can be scientifically confirmed. According to a survey of Jonathan Gardener from Georgetown University's McDonough School of Business, 92% of senior business executives have perceived that favoritism occurs in employee promotions (Forbes, 2013). Certainly, promotions can result from an excellent on-the-job performance, yet, also from being well connected within the firm. However, research on the role of intra-firm networks seems to be sparse. Two strands of related existing literature can be identified: research on social networks and its impacts in the mutual fund industry and literature on the role of favoritism within promotion and demotion decisions. The main difference and new contribution of my study is that i) it focuses on intra-fund family networks between board directors and fund managers and ii) their impact on a fund manager’s intra-organizational mobility is examined. The objective of this paper is to contribute to this scarce but growing literature by exploring the impact of social ties in the mutual fund industry. More specifically, I investigate the role of connections between mutual fund board directors and fund managers and their impact on a fund manager’s promotion and demotion chances. As a particular basis for social connections, this paper explores shared educational backgrounds between directors and fund managers. In a next step, the economic consequences of favoring connected fund managers are assessed and potential remedies to mitigate this preferential treatment are examined. The empirical analysis reveals that being socially connected to a board director within the fund family significantly and economically meaningfully increases a fund manager’s promotion probabilities by 3.09%, ceteris paribus. The economic consequences of the documented favoritism are ambiguous. Most likely, potential benefits (informational advantage) and costs (behavioral bias) of promoting connected fund managers offset each other and lead to the ambiguous empirical results. To conclude, results indicate that director ownership helps to align the conflict of interests and counteracts the preferential treatment.
Référence bibliographique |
Bitterle, Alexandra. Social ties and favoritism within fund families. Louvain School of Management, Université catholique de Louvain, 2018. Prom. : Iania, Leonardo. |
Permalien |
http://hdl.handle.net/2078.1/thesis:13417 |