Social capital and CEO involuntary turnover

Abstract

This study investigates the impact of CEO social capital on involuntary CEO turnover. We measure CEO social capital in two dimensions, social networks and political connections, which are both crucial factors of social capital in China. We find that both types of social capital are negatively associated with CEO involuntary turnover but work in different ways. Consistent with the resource-based view, CEOs with more extensive social networks have better access to external resources, particularly when firms face drastic economic scenarios. Consistent with the entrenchment perspective, having political connections reduces the likelihood of CEO involuntary turnover by increasing managerial entrenchment. To address endogeneity concerns, we employ the instrumental variable approach and the PSM approach, and our main findings continue to hold.