CEO Social Capital and the Value Relevance of Accounting Metrics

Equity investors value CEO social capital when pricing firm equity. When CEO social capital is high, the value relevance of the book value of equity declines, whereas the value relevance of earnings measures increases. Results are stronger for firms in high-tech industries where information asymmetr...

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Bibliographic Details
Published inRisks (Basel) Vol. 11; no. 4; p. 78
Main Authors Luehlfing, Michael S., McCumber, William R., Qiu, Huan
Format Journal Article
LanguageEnglish
Published Basel MDPI AG 01.04.2023
Subjects
Accounting
accounting metrics
Behavior
Book value
Capital market
CEO social capital
Chief executive officers
Corporate governance
Earnings per share
Economic aspects
Efficiency
Equity
Financial reporting
Hypotheses
Influence
Intangible assets
Investments
Management
Practice
Profits
Reputations
Social aspects
Social capital
Social networks
value relevance
United States
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Summary:Equity investors value CEO social capital when pricing firm equity. When CEO social capital is high, the value relevance of the book value of equity declines, whereas the value relevance of earnings measures increases. Results are stronger for firms in high-tech industries where information asymmetries are higher. Social capital may be deconstructed into informational and reputational effects and we report that social capital is a meaningful determinant of value relevance in both scenarios. Results are robust to alternative variable definitions, controls and tests for endogeneity. The results strongly suggest that CEO social capital improves the information environment around firms, benefiting users of accounting metrics.
ISSN:2227-9091
2227-9091
DOI:10.3390/risks11040078