Trust and the cost of debt financingMeng, Y. and Yin, C. (2019) Trust and the cost of debt financing. Journal of International Financial Markets, Institutions and Money, 59. pp. 58-73. ISSN 1042-4431
It is advisable to refer to the publisher's version if you intend to cite from this work. See Guidance on citing. To link to this item DOI: 10.1016/j.intfin.2018.11.009 Abstract/SummaryThis paper examines the relation between the level of trust in a country and the cost of debt. Using data on firms located in 22 countries over a 20-year period, we quantify the country trust level and find strong evidence that firms in countries with a higher level of societal trust have lower bond yield spreads. We also find that the impact of trust on the cost of debt is more pronounced in countries with a poor governance environment and during a time of financial crisis. Overall, our results highlight the role of social capital in shaping corporate financial behavior.
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