Board social capital and stock price crash risk

Khalil Jebran (), Shihua Chen () and Ruibin Zhang ()
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Khalil Jebran: Dongbei University of Finance and Economics
Shihua Chen: Dongbei University of Finance and Economics
Ruibin Zhang: Dongbei University of Finance and Economics

Review of Quantitative Finance and Accounting, 2022, vol. 58, issue 2, No 3, 499-540

Abstract: Abstract We show how board social capital influences stock price crash risk. Considering that directors are embedded in two kinds of social capital—internal and external—the association of internal and external board social capital with future stock crash is theoretically proposed and empirically presented. A sample of Chinese firms from 2004 to 2018 is used, and findings reveal that internal board social capital—networking experience among directors within a board—increases future stock crashes. By contrast, external board social capital—the external social networks of directors—reduces future crash risk. Moreover, institutional investors’ monitoring attenuates the effect of internal social capital but increases that of external social capital on future crash risk. Furthermore, information quality, accounting conservatism, and tax avoidance are identified as three potential channels, which explain the relationship between social capital and crash risk. The proposed theory advances the understanding that different types of social capital can have a differential effect on board outcomes.

Keywords: Corporate governance; Board social capital; Stock price crash risk; Institutional investors; China; G14; G30 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (5)

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DOI: 10.1007/s11156-021-01001-3

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