An International Analysis of CEO Social Capital and Corporate Risk-Taking

Abstract

This study examines the effects of CEO social capital on corporate risk-taking around the world.

We document a significant positive relation between CEO social capital and aggregate corporate risk-taking. Further, we find that CEOs with large social capital prefer riskier investment and financial policies. We also determine that the effect of CEO social capital on corporate risk-taking is moderated by the extent of legal protections provided to shareholders, the financial development, and the culture of the country in which a firm is incorporated. Our results are robust to alternative proxies of risk-taking, alternative model specifications, and tests for endogeneity.

Keywords: social capital, social networks, corporate risk-taking

JEL Classification: G30, Z13