Social capital and trade credit

Mostafa Monzur Hasan, Ahsan Habib*

*Corresponding author for this work

Research output: Contribution to journalArticle

7 Citations (Scopus)

Abstract

We investigate the relation between social capital and firms' use of trade credit in the USA. We also estimate the extent to which social capital is both directly and indirectly related to firms' use of trade credit. Using a large sample of US data, we find robust evidence that firms headquartered in high social capital counties use less trade credit: a finding that is both statistically and economically significant. Our analysis also reveals that social capital, both directly and indirectly (through the financial constraints channel), influences firms' use of trade credit. An additional analysis reveals that the county-level social norms provide the mechanism through which social capital influences firm-level trade credit. Our results are robust to alternative measures of social capital and trade credit, and are not driven by omitted variable bias or endogeneity issues. Overall, our results show that county-level social capital influences organizational outcomes.

Original languageEnglish
Pages (from-to)158-174
Number of pages17
JournalInternational Review of Financial Analysis
Volume61
DOIs
Publication statusPublished - 1 Jan 2019
Externally publishedYes

Keywords

  • Financing constraints
  • Social capital
  • Trade credit

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