Relationships of Collapse: Structural Holes, Opportunism and Fraud in Financial Markets

• In Event: 355 - Section on Economic Sociology Roundtable Session (one-hour).
  In Refereed Roundtable: Table 06. Trust in Uncertain Markets

Abstract

We explore the social-behavioral aspects of financial markets and examine the role of social relations and networks which eventually led to the market crash in the telecommunications sector. We hypothesize that the network characteristics of financial intermediaries allowed securities analysts to control and manipulate information that was publicized to investors. We argue that structural holes in the network of various actors within the telecommunications market generated opportunities for malfeasance that brought about the market collapse. We highlight the harmful effects of over-embeddedness by illustrating that strong and dense networks within the finance sector distorted the flow of information. We also explore how identity, status, role conformity and herding behavior played into the market crash in telecommunications.

Authors

• Bryce Hannibal, Texas A&M University

• Hiroshi Ono, Texas A&M University