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: Suggested Citation