Managerial risk-reducing incentives and social and exchange capital
Managerial risk-reducing incentives and social and exchange capital
This study investigates the impact of managerial risk-reducing incentives on the firm's social and exchange capital. Using CEO inside debt holdings to proxy for the incentives of risk-averse managers, we find that CEOs with more inside debt holdings are likely to invest more in building social capital, which targets broader society and potentially offers anti-risk protection advantages, to shield the value of their inside debt. However, our results further show that managerial risk-reducing incentives have no impact on firms' exchange capital, suggesting the need to recognize the difference between social and exchange capital. These findings corroborate the view that CEOs invest in social capital as a risk management strategy. Furthermore, this paper presents an understanding of the role that institutional investors play in moderating the impact of managerial risk-reducing incentives on social capital. Our results suggest that institutional investors constrain CEOs that have greater inside debt incentives from investing in social capital. However, they are still willing to increase the investment in social capital for risk management purposes when firm risk is high.
Social capital; Managerial risk-reducing incentives; CEO inside debt holdings; Institutional investors; Exchange capital; Firm risk
Zhang, Zhuang
df7b9fa8-04fd-4085-b74d-c9c1506b974e
Chizema, Amon
36a489f6-fc83-4d00-846d-2f91b980a5c0
Kuo, Jing-ming
4ded9336-66d1-4a13-bc34-5473e6532eb6
Zhang, Qingjing
af719b43-b76c-4d0e-ad41-ff58ebbc505d
Zhang, Zhuang
df7b9fa8-04fd-4085-b74d-c9c1506b974e
Chizema, Amon
36a489f6-fc83-4d00-846d-2f91b980a5c0
Kuo, Jing-ming
4ded9336-66d1-4a13-bc34-5473e6532eb6
Zhang, Qingjing
af719b43-b76c-4d0e-ad41-ff58ebbc505d
Zhang, Zhuang, Chizema, Amon, Kuo, Jing-ming and Zhang, Qingjing
(2021)
Managerial risk-reducing incentives and social and exchange capital.
British Accounting Review, [101056].
(doi:10.1016/j.bar.2021.101056).
Abstract
This study investigates the impact of managerial risk-reducing incentives on the firm's social and exchange capital. Using CEO inside debt holdings to proxy for the incentives of risk-averse managers, we find that CEOs with more inside debt holdings are likely to invest more in building social capital, which targets broader society and potentially offers anti-risk protection advantages, to shield the value of their inside debt. However, our results further show that managerial risk-reducing incentives have no impact on firms' exchange capital, suggesting the need to recognize the difference between social and exchange capital. These findings corroborate the view that CEOs invest in social capital as a risk management strategy. Furthermore, this paper presents an understanding of the role that institutional investors play in moderating the impact of managerial risk-reducing incentives on social capital. Our results suggest that institutional investors constrain CEOs that have greater inside debt incentives from investing in social capital. However, they are still willing to increase the investment in social capital for risk management purposes when firm risk is high.
Text
Managerial Risk-Reducing Incentives and Social and Exchange Capital
- Accepted Manuscript
More information
Accepted/In Press date: 27 September 2021
e-pub ahead of print date: 2 October 2021
Additional Information:
Funding Information:
The authors are grateful to the editors, particularly Wenxuan Hou and Nathan Lael Joseph, who oversaw the editorial process of our paper, and the anonymous associate editor and reviewer for their constructive comments and insightful suggestions during the review process.
Publisher Copyright:
© 2021 British Accounting Association
Keywords:
Social capital; Managerial risk-reducing incentives; CEO inside debt holdings; Institutional investors; Exchange capital; Firm risk
Identifiers
Local EPrints ID: 451557
URI: http://eprints.soton.ac.uk/id/eprint/451557
ISSN: 0890-8389
PURE UUID: 15a90c83-b38e-4fc6-b1dc-9a97914b14a4
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Date deposited: 11 Oct 2021 16:30
Last modified: 17 Mar 2024 06:51
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Author:
Amon Chizema
Author:
Jing-ming Kuo
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