Social Capital and Interfirm Cooperation: The Impact of a Religious Scandal on Trade Credit

48 Pages Posted: 23 Oct 2023

See all articles by Quentin Dupont

Quentin Dupont

Georgetown University - McDonough School of Business

Kayla Freeman

University of Georgia, Terry College of Business, Department of Finance

Date Written: September 23, 2023

Abstract

We study the impact of social capital on interfirm collaboration. Because social capital is endogenous to the cultural environment, we employ adverse shocks to trust in cultural institutions arising from religious scandals as a shock to local social capital. In a triple difference estimation, we find that firms in areas where the shocked religion is prominent decrease their provision of trade credit to customers (relative to sales) by over 5 percentage points. Consistent with a social capital channel, results are stronger for relationships with limited history, greater geographic barriers, or transaction complexity. Our findings offer novel evidence of the causal influence of social capital on interfirm relationships.

Keywords: Social Capital, Trade Credit, Supply Chain Collaboration, Customer-Supplier Relationships

JEL Classification: D22, G32, L14, Z10

Suggested Citation

Dupont, Quentin and Freeman, Kayla, Social Capital and Interfirm Cooperation: The Impact of a Religious Scandal on Trade Credit (September 23, 2023). Georgetown McDonough School of Business Research Paper No. 4582025, Available at SSRN: https://ssrn.com/abstract=4582025 or http://dx.doi.org/10.2139/ssrn.4582025

Quentin Dupont

Georgetown University - McDonough School of Business ( email )

3700 O Street, NW
Washington, DC 20057
United States

Kayla Freeman (Contact Author)

University of Georgia, Terry College of Business, Department of Finance ( email )

Brooks Hall
Athens, GA 30602-6254
United States

HOME PAGE: http://https://sites.google.com/site/kaylafreemanfinance/home

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