CEO Social Capital and the Value Relevance of Accounting Metrics

Michael S. Luehlfing, William R. McCumber and Huan Qiu ()
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Michael S. Luehlfing: College of Business, Louisiana Tech University, Ruston, LA 71272, USA
William R. McCumber: College of Business, Louisiana Tech University, Ruston, LA 71272, USA
Huan Qiu: Else School of Management, Millsaps College, Jackson, MA 39210, USA

Risks, 2023, vol. 11, issue 4, 1-35

Abstract: Equity investors value CEO social capital when pricing firm equity. When CEO social capital is high, the value relevance of the book value of equity declines, whereas the value relevance of earnings measures increases. Results are stronger for firms in high-tech industries where information asymmetries are higher. Social capital may be deconstructed into informational and reputational effects and we report that social capital is a meaningful determinant of value relevance in both scenarios. Results are robust to alternative variable definitions, controls and tests for endogeneity. The results strongly suggest that CEO social capital improves the information environment around firms, benefiting users of accounting metrics.

Keywords: CEO social capital; value relevance; accounting metrics (search for similar items in EconPapers)
JEL-codes: C G0 G1 G2 G3 K2 M2 M4 (search for similar items in EconPapers)
Date: 2023
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