Does social capital influence executive risk-taking incentives?

Pornsit Jiraporn, Sang Mook Lee and Hyeongsop Shim

Finance Research Letters, 2022, vol. 49, issue C

Abstract: We examine the impact of social capital at the US county level on managerial risk-taking incentives. We hypothesize that corporate executives in counties with higher social capital would accept lower equity-based compensation then faithfully behave in terms of efforts and risks following the shareholder trust or restrain themselves from rent-seeking which may harm shareholders. Our main test results with firm fixed effects are consistent with our hypothesis. Additional robustness checks—propensity score matching, instrumental variable, and difference-in-differences analyses—corroborate our main findings. Thus, it is highly likely that social capital has a curbing effect on executive risk-taking incentives.

Keywords: Social capital; cooperative norms; executive risk-taking incentives (search for similar items in EconPapers)
JEL-codes: G30 G32 Z13 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:49:y:2022:i:c:s1544612322003403

DOI: 10.1016/j.frl.2022.103116

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