Abstract
We examine the relation between social trust and the speed of leverage adjustment (SOA) around the world. Using a large international sample (65 countries, 1996–2016), we find that social trust has a positive effect on SOA. In the cross section, we find that the positive effect of social trust on the SOA is more pronounced for: (i) over-levered firms; (ii) firms with higher information asymmetry; (iii) firms with lower ease of financing; and (iv) firms located in countries with weaker governance quality. Overall, we highlight the role of social trust in shaping corporate capital structure.
| Original language | English |
|---|---|
| Pages (from-to) | 3261-3303 |
| Number of pages | 43 |
| Journal | Accounting and Finance |
| Volume | 61 |
| Issue number | 2 |
| Early online date | 27 Sept 2020 |
| DOIs | |
| Publication status | Published - Jun 2021 |
| Externally published | Yes |