Social Networks: The Impact on Firms’ Information Environment and Corporate Communication

Abstract

We construct an interlocking-directorship network and we use social network and graph theory to identify firms that have access to a wider diversity of information, early access to that information and more control over information diffusion. We examine whether, as predicted by the theory, these firms have higher information asymmetry, and if they communicate the information they possess through mandatory and voluntary accounting methods. Our results are consistent with firms that have a brokerage position in the network exhibiting higher information asymmetry but communicating their proprietary information through discretionary accruals and voluntary disclosure.