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CEO social capital in family businesses and its effect on investment opportunities: Asset or liability?

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  • Mauro Romano
  • Christian Favino
  • Luca Pennacchio
  • Francesco Grimaldi

Abstract

Social capital is a widely recognized critical intangible resource for firm success, especially in family businesses, which are considered “emotional arenas”. CEOs' social capital could represent a decisive factor, although its influence is unclear. This research aims to deepen the relationship between CEOs' social capital and firm investment opportunity set (IOS). The research hypothesis assumes a positive relationship between CEO social capital and firm's IOS. CEO social capital is estimated considering network centrality indicators suggested by the authoritative social network analysis literature. The IOS is represented by a single composite indicator of four price‐based proxies and one accounting variable. Using a wide sample of listed Italian family firms, the analysis shows that a CEO with a broader relational network decreases firm investment opportunities. The findings suggest that family businesses, in the Italian context, lack the environmental conditions and critical factors to valorize the CEO's social capital in terms of future investment opportunities.

Suggested Citation

  • Mauro Romano & Christian Favino & Luca Pennacchio & Francesco Grimaldi, 2020. "CEO social capital in family businesses and its effect on investment opportunities: Asset or liability?," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 27(5), pages 2004-2015, September.
    • Handle: RePEc:wly:corsem:v:27:y:2020:i:5:p:2004-2015
    DOI: 10.1002/csr.1941
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