Bowling alone, bowling together: Is social capital priced in bank loans?

C. S.Agnes Cheng, Jing Wang, Ning Zhang, Sha Zhao

Research output: Journal article publicationJournal articleAcademic researchpeer-review

4 Citations (Scopus)


We investigate whether the societal-level social capital enjoyed by firms affects the cost of their bank loans. Employing a measure of societal-level social capital for U.S. counties, we find that firms with higher societal-level social capital are associated with lower loan spreads. To further identify causality, we explore two events: Using a sample of firms that relocate their headquarters for tax reasons, we find that firms that move to lower (higher) social capital counties experience a higher (lower) cost of bank loans following relocations. The second event was the terrorist attack on September 11, 2001. After the disaster, social capital in affected counties—mainly in the State of New York, the State of Virginia, and adjacent counties—increased through social capital building efforts. We show that firms headquartered in the affected counties experience significantly lower loan spreads than other firms after the attack. Our findings contribute to the understanding of how societallevel social capital promotes economic development through its impact on financing costs.

Original languageEnglish
Pages (from-to)449-479
Number of pages31
JournalJournal of Accounting, Auditing and Finance
Issue number4
Publication statusPublished - 1 Jan 2017


  • Loan spreads
  • Private debt
  • Social norms and networks
  • Societal level

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics, Econometrics and Finance (miscellaneous)

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