Co-opted Boards, Social Capital, and Risk-taking

Huilin Huang, Seung Hun Han and Kyumin Cho

Finance Research Letters, 2021, vol. 38, issue C

Abstract: This study investigates the effect of co-opted boards on corporate risk-taking behavior, as well as the moderating effect of social capital on the relation. We find a positive relation between board co-option and equity volatility. Endogeneity concerns are circumvented using the difference-in-difference methodology. We further find that high social capital surrounding firm headquarters alleviates managers’ risk-taking incentives when corporate governance is weak, and that our results are robust to alternative measures of social capital.

Keywords: Co-opted boards; Risk-taking; Equity volatility; Sarbanes-Oxley Act (SOX); Social capital (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:38:y:2021:i:c:s1544612319306336

DOI: 10.1016/j.frl.2020.101535

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