Economics at your fingertips  

Does social capital influence corporate risk-taking?

Humnath Panta

Journal of Behavioral and Experimental Finance, 2020, vol. 26, issue C

Abstract: This paper explores the influence of social capital on corporate risk-taking using a large sample of publicly traded US firms. We predict that firms with high social capital display a higher level of risk-taking behavior. Consistent with our prediction, we find a negative relationship between corporate risk-taking and social capital. This paper shows that the social environment transmits valuable capital to individuals and thereby influences their corporate decision-making process. We also find that the combined effects of excessive risk-taking and social capital result in value destruction to the firm. Our test results are robust to alternatives measures of risk-taking, addressing endogeneity issues, and alternative model specifications. The paper contributes to the finance literature by demonstrating social capital as an important determinant in the corporate decision-making process, particularly in corporate risk-taking decisions.

Keywords: Risk-taking; Social capital; Trust; Idiosyncratic risk; Systematic risk (search for similar items in EconPapers)
JEL-codes: D71 D81 G30 G32 G41 Z13 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

DOI: 10.1016/j.jbef.2020.100301

Access Statistics for this article

Journal of Behavioral and Experimental Finance is currently edited by Michael Dowling and Jürgen Huber

More articles in Journal of Behavioral and Experimental Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().

Page updated 2022-01-04
Handle: RePEc:eee:beexfi:v:26:y:2020:i:c:s2214635019300772