Ethical issues around share repurchase announcements: The role of social capital

We examine whether social capital mitigates managerial opportunism around share repurchase announcements. We find that firms headquartered in high social capital states are associated with: (i) higher repurchase completion rates, and more so in environments where governance is weak and the potential for misleading investors is high, (ii) a smaller likelihood of information manipulation such as revealing bad news before repurchases, and (iii) lower completion rates when shares are less undervalued. By documenting that firms’ external social environments help curb managerial opportunism, our study suggests that the location of headquarters facilitates trustworthiness and affects ethical considerations in corporate announcements.