An international analysis of CEO social capital and corporate risk‐taking

Ferris, Stephen P.; Javakhadze, David; Rajkovic, Tijana

doi:10.1111/eufm.12156

Cited by 53 publications

(39 citation statements)

References 119 publications

(206 reference statements)

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“…Fang, Hasan, Liu, and Wang () find that CEO social networks (professional and educational ties) lead to increased risk taking in U.S. banks. Ferris et al () also report a positive association between CEO social capital and aggregate corporate risk taking. Future research should use CEO connectedness and social network‐based power measures to explore the impact of competition and governance on firm risk.…”

Section: Discussionmentioning

confidence: 95%

“…Previous studies (e.g., Cain & McKeon, 2016;Cassell, Huang, Sanchez, & Stuart, 2012;Ferreira & Laux, 2007;Ferris, Javakhadze, & Rajkovic, 2019;Low, 2009;Pathan, 2009)…”

Section: Measuring Firm Riskmentioning

confidence: 99%

“…Previous studies (e.g., Cain & McKeon, ; Cassell, Huang, Sanchez, & Stuart, ; Ferreira & Laux, ; Ferris, Javakhadze, & Rajkovic, ; Low, ; Pathan, ) use total risk and idiosyncratic risk to measure corporate risk. Total risk measures overall risk of a firm and is estimated by the annualized standard deviation of daily stock returns for each fiscal year.…”

Section: Data Sample Selection and Measurementmentioning

confidence: 99%

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CEO power and corporate risk: The impact of market competition and corporate governance

Sheikh

2019

Corporate Governance

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Research Question/Issue Although there is no unified theory that can explain the relationship between CEO power and corporate risk, the empirical evidence generally finds a positive association. This study argues that market competition and corporate governance play critical roles in influencing this relationship. Research Findings/Insights Using a large panel of nonfinancial U.S. corporations for the period 1992–2015, I find that CEO power is positively associated with total and idiosyncratic measures of risk. However, this positive association remains significant only when market competition is high or corporate governance is strong. Theoretical/Academic Implications The research design of this study combines the predictions of agency theory, the behavioral agency model, and prospect theory to further our understanding of the relationship between CEO power and corporate risk, including consideration of how competition and corporate governance influence this relationship. Practitioner/Policy Implications The empirical evidence presented in this study can help boards to more accurately gauge when CEO power is most beneficial in terms of optimal levels of corporate risk and to better understand the relationship between power and risk. The results suggest that boards should grant more power to their CEOs when their firms operate in high‐competition markets or have strong corporate governance in place.

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Section: Discussionmentioning

confidence: 95%

“…Previous studies (e.g., Cain & McKeon, 2016;Cassell, Huang, Sanchez, & Stuart, 2012;Ferreira & Laux, 2007;Ferris, Javakhadze, & Rajkovic, 2019;Low, 2009;Pathan, 2009)…”

Section: Measuring Firm Riskmentioning

confidence: 99%

Section: Data Sample Selection and Measurementmentioning

confidence: 99%

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CEO power and corporate risk: The impact of market competition and corporate governance

Sheikh

2019

Corporate Governance

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“…In a seminal paper, Aghion et al (2010) model trust and regulation. The authors illustrate two outcomes: one in which a society is trusting and trustworthy, with no regulation but good economic outcomes, and another with low trust and low trustworthiness, but heavy regulation 2 Trust is also central to corporate governance (Bloom, Sadun, & Van Reenen, 2012;Cingano & Pinotti, 2016;Ferris, Javakhadze, & Rajkovic, 2017;La Porta, Lopez-de-Silanes, Shleifer, & Vishny, 1997). In addition, trust is beneficial for firms, since large corporations rely on cooperation between strangers (Fukuyama, 1995).…”

Section: Trust and The Regulation Hypothesismentioning

confidence: 99%

Trust, regulation, and contracting institutions

Cline

Williamson

2020

Euro Fin Management

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This paper demonstrates that trust directly influences contracting efficiency. We document that trust reduces demand for contract regulation and positively relates to a high‐quality contracting environment, supporting a substitution hypothesis. Furthermore, contract regulation no longer leads to poor contracting outcomes. These findings suggest that lack of trust significantly explains inefficient contracting institutions. Based on interaction effects, we note that trust could complement formal enforcement in countries with weak regulation. As regulation increases, trust substitutes for contract regulation. Overall, trust positively promotes efficient contracting by reducing burdensome regulation and providing an alternative to formal contract enforcement.

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“…Second, the study provides a valuable contribution to the growing literature on the effects of social ties on corporate decisions (e.g., Cai & Sevilir, 2012;Faleye et al, 2014;Ferris, Javakhadze, & Rajkovic, 2018;Fracassi, 2017) by focusing on the effects on social capital on the cash flow sensitivity of cash.…”

mentioning

confidence: 99%

How friends with money affect corporate cash policies? The international evidence

Javakhadze¹,

Rajkovic

2018

Euro Fin Management

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We examine the association between managerial social capital and the cash flow sensitivity of cash in an international setting. We find that social capital reduces the marginal propensity to save cash out of cash flows. This association is stronger for more financially constrained firms, firms with high hedging needs, and firms with more uncertain cash flows. The effect of social capital is partially moderated by the extent of legal protection standards and financial development. We also show that social capital matters for valuation. These findings are robust to alternative model specifications, alternative variable measurement, and tests for endogeneity.

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An international analysis of CEO social capital and corporate risk‐taking

Cited by 53 publications

References 119 publications

CEO power and corporate risk: The impact of market competition and corporate governance

CEO power and corporate risk: The impact of market competition and corporate governance

Trust, regulation, and contracting institutions

How friends with money affect corporate cash policies? The international evidence

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