Investment, as an important part of corporate economic activities, plays an important role in companies participating in market competition. A large number of studies have shown that serious executive inefficiency investment behaviors are common in listed companies. Senior managers control the investment decision-making power of enterprises, affect the efficiency of capital allocation, and then determine enterprises’ market competitiveness and development prospects. With the in-depth study of the economic effect of social network on the capital market, some scholars have shown that social network has the role of information sharing in mutually beneficial transactions. China is a relationship-based country, and social relationships are reflected in many aspects of life. In sociology, social network is defined as a group of connected people in the same community（such as residence, school, and work unit）. This article uses the personal information of CEOs and CFOs to construct the social relationship index between CEOs and CFOs, which is measured by alumni relationship or fellow-villager relationship. In order to verify whether the social relationship between CEOs and CFOs can help to strengthen the information communication between the executive team and improve investment efficiency, this article uses 2007-2019 A-share listed companies as a research sample, and uses a combination of normative research and empirical research to study the impact of CEO-CFO social relationships on the investment efficiency of enterprises. The study finds that enterprises with a social relationship between CEOs and CFOs have higher investment efficiency. And when CEOs have no financial background, the CEO-CFO social relationship has a stronger role in promoting the investment efficiency of enterprises. The research results show that the CEO-CFO social relationship helps CEOs and CFOs communicate better, and then make more effective investment decisions. This article further examines the moderating effect of industry competition. The study finds that when the industry competition becomes more intense, the CEO-CFO social relationship has a stronger role in promoting the investment efficiency of enterprises. This article provides empirical evidence for how social relationships affect the information communication of the senior management team, and helps to understand the impact of the social network of the senior management team on corporate investment behavior. With the continuous improvement of China’s institutional environment, financial work has played a key role in the continuous growth of enterprises. More and more CFOs are involved in major corporate decisions. Some listed companies even require the successor CEOs to have professional background of CFOs. Therefore, the research conclusions of this article are also helpful to understand the important role of CFOs in corporate investment decision-making and have certain enlightenment for enterprises to build a reasonable management team.
CEO-CFO Social Relationships and Enterprise Investment Efficiency
Journal of Shanghai University of Finance and Economics Vol. 23, Issue 05, pp. 37 - 49,152 (2021) DOI:10.16538/j.cnki.jsufe.2021.05.003
Cite this article
He Kaigang, Liu Yingge, Wang Yong. CEO-CFO Social Relationships and Enterprise Investment Efficiency[J]. Journal of Shanghai University of Finance and Economics, 2021, 23(5): 37-49.