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

Iftekhar Hasan, Chun Keung Hoi, Qiang Wu, Hao Zhang

Research output: Journal article publicationJournal articleAcademic researchpeer-review

85 Citations (Scopus)

Abstract

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
DOIs
Publication statusPublished - 1 Jun 2017
Externally publishedYes

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

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