Publication

Social Capital and Debt Contracting: Evidence from Bank Loans and Public Bonds

Hasan, I., Hoi, C. K., Wu, Q. & Zhang, H., Jun-2017, In : Journal of Financial and Quantitative Analysis. 52, 3, p. 1017-1047 31 p.

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  • Social Capital and Debt Contracting: Evidence from Bank Loans and Public Bonds

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DOI

We find that firms headquartered in U.S. counties with higher levels of social capital incur lower bank loan spreads. This finding is robust to using organ donation as an alternative social capital measure and incremental to the effects of religiosity, corporate social responsibility, and tax avoidance. We identify the causal relation using companies with a social-capital-changing headquarters relocation. We also find that high-social-capital firms face loosened nonprice loan terms, incur lower at-issue bond spreads, and prefer public bonds over bank loans. We conclude that debt holders perceive social capital as providing environmental pressure that constrains opportunistic firm behaviors in debt contracting.

Original languageEnglish
Pages (from-to)1017-1047
Number of pages31
JournalJournal of Financial and Quantitative Analysis
Volume52
Issue number3
Publication statusPublished - Jun-2017
Externally publishedYes

    Keywords

  • CORPORATE GOVERNANCE, EARNINGS MANAGEMENT, ORGANIZATIONS, MATTER, TRUST, STOCK, PARTICIPATION, TURNOUT, QUALITY, CHOICE

ID: 66169087