Social Capital and Capital Structure

25 Pages Posted: 22 May 2020 Last revised: 23 Jul 2020

Date Written: April 26, 2020


I demonstrate that in the context of a Modigliani-Miller-type model that a firm financing social capital and physical capital will favor equity financing over debt financing without bankruptcy. With bankruptcy, debt financing will be used, but equity financing will be favored by firms that use large amounts of social capital, as it will increase their value.

Keywords: capital structure, social capital, corporate social responsibility, CSR

JEL Classification: G30, G32

Suggested Citation

Gregory, Richard Paul, Social Capital and Capital Structure (April 26, 2020). Available at SSRN: or

Richard Paul Gregory (Contact Author)

East Tennessee State University ( email )

Department of Economics and Finance
Johnson City, TN 37614
United States

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