MANAGERS AND (SECRET) SOCIAL NETWORKS: THE INFLUENCE OF THE FREEMASONRY ON FIRM PERFORMANCE

Authors


  • Acknowledgments:  This paper was previously circulated under the title: Managers, Firms and (Secret) Social Networks: The Economics of Freemasonry. I am especially grateful to Fabrizio Zilibotti (the Editor) and three anonymous referees for their comments. I am indebted to Stefano DellaVigna and Lyndon Moore for many helpful discussions. I thank Ran Abramitzky, Liam Brunt, Ann Carlos, Marco Da Rin, Hans Degryse, Frank de Jong, Mariassunta Giannetti, Leslie Hannah, Vasso Ioannidou, Annet Kocx, Ralph Koijen, Francis Kramarz, Jason Long, Dong Lou, Joel Mokyr, Tom Nicholas, Steven Ongena, Kim Oosterlinck, Luc Renneboog, Paola Sapienza, Paul Sengmüller, and seminar participants at the University of Bolzano, the Swiss Finance Institute, Tilburg University, the Second Finance and History Workshop in Utrecht, and the 2009 WFA conference in San Diego for comments and suggestions. I would also like to thank the Grand Lodge of England and Wales for providing me with the information on Freemasonry membership. Financial support from the Global Scholars Research Network is gratefully acknowledged.

E-mail: f.braggion@uvt.nl

Abstract

In this paper, I study the impact of managers’ affiliations with the Freemasonry on the performances of companies. Using a unique data set of 412 companies quoted on the London Stock Exchange between 1895 and 1902, I find that young and small firms run by Masonic managers exhibited larger leverage ratios. These companies earned higher profits, although the effect is not statistically significant. Large publicly quoted corporations managed by Freemasons instead had lower profits and lower Tobin’s Q. I discuss the issue of the endogeneity of Freemasonry membership, and I use four different approaches to partially address this.

Ancillary