The international effect of CEO social capital on the value relevance of accounting metrics

Download This Article

This work is licensed under a Creative Commons Attribution 4.0 International License.

Abstact

We investigate the effect of chief executive officer (CEO) social capital, proxied by the CEO network centrality, on the value relevance of accounting metrics for non-US firms, and the roles country-level governance attributes play during the valuation process. We find a strong positive relation between CEO social capital and the value relevance of book equity but a strong negative relation between CEO social capital and the value relevance of earning metrics. Further analysis shows that the results are robust with the use of different regression models, and that strong country-level governance quality cannot significantly alter the significant negative relation between CEO social capital and value relevance of earning metrics. Interestingly, we find that the positive relation between CEO social capital and the value relevance of book equity is weakened while the negative relation between CEO social capital and value relevance of earnings metrics is strengthened for firms in developed countries where country-level governance is stronger and institutional investors play a more important role in the market. Overall, our evidence supports the theory that CEO social capital has both “positive” and “detrimental” effects on firm and market outcomes.

Keywords: CEO Social Capital, Value Relevance, Governance

JEL Classification: G30, G40, M41

Received: 21.04.2022
Accepted: 27.04.2022

How to cite: McCumber, W. R., Qiu, H., & Islam, M. S. (2022). The international effect of CEO social capital on the value relevance of accounting metrics. In G. M. Mantovani, A. Kostyuk, & D. Govorun (Eds.), Corporate governance: Theory and practice (pp. 40–47). https://doi.org/10.22495/cgtapp6