Social Capital and Firms' Debt Financing

The paper studies the effect of social capital on the firms' debt capacity and structure in China.We measure the social capital of China's 31 provinces through the number of NPOs, the index of trust among peoples, and the blood donation ratio. The results show that the firms in the better social capital development areas will incline to have higher debt ratio and longer debt maturity, and the firms could get debt financing through less mortgage. The paper has two contributions to the economics literature, firstly, it confirms the economic value of social capital form micro-perspective; second, it provides a new perspective to understand the firms'capital structure choice.