Social Capital and Firms' Debt Financing
Central University of Finance and Economics (CUFE)
April 1, 2009
The paper studies the effect of social capital on the firms' debt capacity and capital structure in China. We measure the social capital of China's 31 provinces through the number of NGOs, the index of trust among peoples, and the blood donation ratio. The results show that the firms in the better social capital development areas will incline to have higher debt ratio and longer debt maturity, and the firms could get debt financing through less mortgage. The paper has two contributions to the economics literature, first, it confirms the economic value of social capital from micro-perspective; second, it provides a new perspective to understand the firms' capital structure choice.
Number of Pages in PDF File: 24
Keywords: social capital, capital structure, debt maturity
JEL Classification: G3, H25, H26
Date posted: April 2, 2009
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