Profits and Connectedness

Continuing with the theme of corporate connectedness, I have calculated various measures of network structure in Malaysia's listed companies. I focus here on PageRank and Degree. Named after Google co-founder Larry Page - PageRank is an algorithm used by the search engine giant to rank websites in its search results. I apply the algorithm here to rank companies in the network of cross shareholding in order to determine importance of a company. Degree is simply the number of shareholders a company has. The matrix graph below confirms my hypothesis that more important companies are likely to receive more links from other nodes in the network, namely other companies or institutional investors.

Could it be that investors are good at picking winners or does having social capital (high connections) mean investee companies have greater access to resources than loosely connected firms? 

Regressing Return on Shareholders' Funds on financial and network measures as at 2015:

Needless to say, there is an endogeneity problem here and I will need to use instrumental variables to tease this out.