CEO Social Capital and Corporate Cash Holdings

There is extensive research documenting the effect of CEO physical and psychological attributes on corporate cash management; little is known about the role of CEO social capital in corporate cash holdings. We examine the influence of the social capital of Chinese CEOs on the listed firms’ cash holdings during the period from 2009 to 2023. The findings reveal that firms led by CEOs possessing higher social capital withhold substantially lower cash reserves than those whose CEOs have lower social capital. The negative association is driven by better access to financial resources, trust between the CEO and investors, and improvement in internal control quality. In addition, state ownership weakens the association between CEO social capital and cash holdings, whereas industry competition and the pandemic have no meaningful influence on this association. We confirm the findings by using alternative variable measurements, specification approaches, and a battery of endogeneity tests. The study offers new insights for boards of directors and investors about the strategic importance of CEO social capital in corporate liquidity management.