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Co-opted Boards, Social Capital, and Risk-taking

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  • Huang, Huilin
  • Han, Seung Hun
  • Cho, Kyumin

Abstract

This study investigates the effect of co-opted boards on corporate risk-taking behavior, as well as the moderating effect of social capital on the relation. We find a positive relation between board co-option and equity volatility. Endogeneity concerns are circumvented using the difference-in-difference methodology. We further find that high social capital surrounding firm headquarters alleviates managers’ risk-taking incentives when corporate governance is weak, and that our results are robust to alternative measures of social capital.

Suggested Citation

  • Huang, Huilin & Han, Seung Hun & Cho, Kyumin, 2021. "Co-opted Boards, Social Capital, and Risk-taking," Finance Research Letters, Elsevier, vol. 38(C).
    • Handle: RePEc:eee:finlet:v:38:y:2021:i:c:s1544612319306336
    DOI: 10.1016/j.frl.2020.101535
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    Cited by:

    1. Bhuiyan, Md. Borhan Uddin & Sangchan, Pinprapa & Costa, Mabel D', 2022. "Do Co-opted boards affect the cost of equity capital?," Finance Research Letters, Elsevier, vol. 46(PB).
    2. Chen, Jing & Hu, Peiwen & Liu, Shan & Liu, Xinghe, 2024. "Too scared to make mistakes at home: CEO hometown identity and corporate risk-taking," Research in International Business and Finance, Elsevier, vol. 70(PB).

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