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Social capital and idiosyncratic return volatility

Author

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  • Mostafa Monzur Hasan

    (School of Economics and Finance, Curtin University, Perth, WA, Australia)

  • Ahsan Habib

    (School of Accountancy, Massey University, Auckland, New Zealand)

Abstract

We examine whether regional social capital has any impact on idiosyncratic return volatility. Using US data, we find that firms headquartered in high social capital counties exhibit significantly lower idiosyncratic return volatility. This effect is more pronounced in the presence of financial reporting quality and corporate social responsibility. When we estimate the direct and indirect effects of social capital, our study reveals that the direct effect of social capital captures around 80% of the total effect. These findings suggest that firm-specific variables do not explain all of a firm’s idiosyncratic return volatility, but regional social capital also plays a role. JEL classification: G10, G12, G30, M14

Suggested Citation

  • Mostafa Monzur Hasan & Ahsan Habib, 2019. "Social capital and idiosyncratic return volatility," Australian Journal of Management, Australian School of Business, vol. 44(1), pages 3-31, February.
    • Handle: RePEc:sae:ausman:v:44:y:2019:i:1:p:3-31
    DOI: 10.1177/0312896217717573
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    More about this item

    Keywords

    Corporate social responsibility; financial reporting quality; idiosyncratic return volatility; social capital;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility

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