An International Analysis of CEO Social Capital and Corporate Risk-Taking
European Financial Management, 2019, Volume 25, pp. 3-37.
54 Pages Posted: 19 Sep 2017 Last revised: 2 Feb 2019
Date Written: September 14, 2017
This study examines the effects of CEO social capital on corporate risk-taking around the world.
We document a significant positive relation between CEO social capital and aggregate corporate risk-taking. Further, we find that CEOs with large social capital prefer riskier investment and financial policies. We also determine that the effect of CEO social capital on corporate risk-taking is moderated by the extent of legal protections provided to shareholders, the financial development, and the culture of the country in which a firm is incorporated. Our results are robust to alternative proxies of risk-taking, alternative model specifications, and tests for endogeneity.
Keywords: social capital, social networks, corporate risk-taking
JEL Classification: G30, Z13
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