Leverage, Debt Maturity, and Social Capital

Author(s)

Kershen Huang, Nova Southeastern UniversityFollow
Chenguang Shang, Bentley UniversityFollow

Document Type

Article

Publication Title

Journal of Corporate Finance

ISSN

1872-6313

Publication Date

2-2019

Abstract/Excerpt

We find that both firm leverage and short-term debt ratios are negatively associated with social capital (i.e., the altruistic tendency and mutual trust among people within a community). This relation is more pronounced in cases where information asymmetry problems are more severe and is robust to using alternative measures of key variables, addressing endogeneity issues, employing alternative model specifications, and simultaneously estimating leverage and short-term debt. An analysis on debt structure (bank loans vs. public debt) shows consistent results. Our findings are in line with the idea that social capital lowers the need for corporate borrowing mechanisms as a means to alleviate agency problems for firms.

DOI

10.1016/j.jcorpfin.2018.11.001

Volume

54

Issue

2019

First Page

26

Last Page

46

NSUWorks Citation

Huang, Kershen and Shang, Chenguang, "Leverage, Debt Maturity, and Social Capital" (2019). HCBE Faculty Articles. 1032.
https://nsuworks.nova.edu/hcbe_facarticles/1032