NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Yan Li

Baruch College

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Institutional Affiliation: Baruch College

NBER Working Papers and Publications

June 2020Social Proximity to Capital: Implications for Investors and Firms
with Theresa Kuchler, Lin Peng, Johannes Stroebel, Dexin Zhou: w27299
We use social network data from Facebook to show that institutional investors are more likely to invest in firms from regions to which they have stronger social ties. This effect of social proximity on investment behavior is distinct from the effect of geographic proximity. Social connections have the largest influence on investments of small investors with concentrated holdings as well as on investments in firms with a low market capitalization and little analyst coverage. We also find that the response of investment decisions to social connectedness affects equilibrium capital market outcomes: firms in locations with stronger social ties to places with substantial institutional capital have higher institutional ownership, higher valuations, and higher liquidity. These effects of social p...
 
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