Community social capital and board advising: evidence from the structure of board committees
Community social capital and board advising: evidence from the structure of board committees
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-social-capital communities focus more on advising.
Community Social Capital, Firm Location, Board Advising, Board Structure, Board Committee
Li, Zhe
78ca3dc7-28e3-4c71-9756-9d01e56601ef
Wang, Bo
dc1fccae-55e8-4d28-8eb9-1c539247e940
Li, Zhe
78ca3dc7-28e3-4c71-9756-9d01e56601ef
Wang, Bo
dc1fccae-55e8-4d28-8eb9-1c539247e940
Li, Zhe and Wang, Bo
(2022)
Community social capital and board advising: evidence from the structure of board committees.
British Journal of Management.
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-social-capital communities focus more on advising.
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British J of Management - 2022 - Li - Community Social Capital and Board Advising Evidence from the Structure of Board
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Accepted/In Press date: 5 September 2022
e-pub ahead of print date: 27 October 2022
Keywords:
Community Social Capital, Firm Location, Board Advising, Board Structure, Board Committee
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Local EPrints ID: 469159
URI: http://eprints.soton.ac.uk/id/eprint/469159
ISSN: 1045-3172
PURE UUID: 28a79ee7-9bec-4c7b-ab06-26b7fa4fb8e8
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Date deposited: 08 Sep 2022 16:31
Last modified: 17 Mar 2024 04:09
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Author:
Zhe Li
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