Is Social Capital Valuable? Evidence from Mergers and Acquisitions

Jo-Ann Suchard (), Giang Nguyen () and Yuelin Wang ()
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Jo-Ann Suchard: UNSW Business School, University of New South Wales Sydney.
Giang Nguyen: School of Political Science and Economics, Waseda University.
Yuelin Wang: School of Political Science and Economics, Waseda University.

No 2117, Working Papers from Waseda University, Faculty of Political Science and Economics

Abstract: Using comprehensive social capital data of U.S. counties from the Social Capital Project, we show evidence that the county-level social capital where the acquirer is located is positively related to the acquirer’s announcement returns. This finding withstands alternative model specifications and remains robust to endogeneity concerns. We also document that social capital has a more pronounced effect on the acquirer’s announcement returns when the supermajority to approve a merger, acquirer size, the deal size, and the ratio of stock payment are larger and the percentage of blockholder ownership is smaller. Additionally, we find that social capital creates more synergies, enhances acquirers’ long-term performance, and shortens deal completion duration. Overall, our results support the shareholder value maximization view that social capital constrains managerial opportunistic and selfserving behaviors, which leads to better acquisition outcomes.

Keywords: Social Social Capital; Merger and Acquisition; Shareholder Value Maximization. (search for similar items in EconPapers)
JEL-codes: G34 Z13 (search for similar items in EconPapers)
Pages: 67 pages
Date: 2021-09
New Economics Papers: this item is included in nep-cfn, nep-com, nep-isf, nep-soc and nep-ure
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