Does social capital matter to stock price crash risk? Evidence from the US listed firms

Abstract

Using a dataset comprised of US publicly traded firms from 2002 to 2018, this paper reveals a significantly negative relationship between social capital and stock price crash risk. Firms located in regions with higher levels of social capital tend to have lower stock price crash risk. This result holds after addressing potential endogeneity. The negative association is more prominent for firms located in rural areas, with greater R&D expenditure, with higher default risk, and during the time periods of non-financial crisis, respectively. The results of this study are robust to alternative measurements of stock price crash risk, index interpolation, index aggregation, and additional controls.