No abstract

We investigate how community social capital, captured by the strength of cooperative norms and social networks within a geographical community, affects the internal structure of corporate boards. We find that firms headquartered in high-social-capital US counties have a more advising-intensive board structure, as they are more likely to set up specialised advisory committees and appoint more advisory directors. These findings are robust to endogeneity concerns and a battery of sensitivity tests. Our mediation analysis shows that the increased board advising intensity, induced by community social capital, reduces investment inefficiency. We further reveal that community social capital reduces board monitoring intensity and directors' monitoring efforts. Overall, our results are consistent with the argument that community social capital serves as a societal monitoring mechanism to reduce firms' need for board monitoring and, hence, firms' boards located in high-socialcapital communities focus more on advising.

This study examines the impact of cross‐border mergers and acquisitions (M&As) on acquirers’ corporate social responsibility (CSR). Based on a sample of Chinese listed firms, we find that firms with cross‐border M&A activities experience an improvement in subsequent CSR performance. Specifically, the CSR rating is approximately 8.24% higher in firms with cross‐border M&As than in those without such activities. We also find that this positive influence is more pronounced in firms with low initial CSR ratings than in those with high initial CSR ratings at the time when a cross‐border M&A deal is completed. Additional analyses reveal that this positive effect is mainly driven by the target firms from countries with high social preference relative to China and that the enhancement in CSR driven by cross‐border M&As translates into higher operating performance and easier access to finance. Overall, our findings demonstrate that cross‐border M&As can serve as a critical channel for acquirers from a country with low institutional quality to build a better reputation through environmentally friendly behaviour and socially responsible engagement, and therefore gain capital market benefits.