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Managerial risk-reducing incentives and social and exchange capital

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
0890-8389
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).

Record type: Article

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
Restricted to Repository staff only until 2 October 2023.
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More information

Accepted/In Press date: 27 September 2021
e-pub ahead of print date: 2 October 2021
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
ORCID for Zhuang Zhang: ORCID iD orcid.org/0000-0001-5369-3144

Catalogue record

Date deposited: 11 Oct 2021 16:30
Last modified: 23 Oct 2021 01:50

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Contributors

Author: Zhuang Zhang ORCID iD
Author: Amon Chizema
Author: Jing-ming Kuo
Author: Qingjing Zhang

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