Social capital and entrepreneurial financing choice

Evan Dudley

Journal of Corporate Finance, 2021, vol. 70, issue C

Abstract: This paper investigates the influence of social capital on young firms' financing arrangements. Using a sample of U.S. start-ups, I find that social capital, as captured by secular norms and social networks in the entrepreneur's county, increases access to outside financing and reduces reliance on owner equity to finance the new venture. Financing to entrepreneurs located in counties with greater social capital involves higher amounts of leverage in the form of outside debt. This finding persists in a difference-in-difference test that controls for unobservable geographic determinants of capital structure.

Keywords: Social capital; Capital structure; Entrepreneurial finance; Small business lending (search for similar items in EconPapers)
JEL-codes: G32 L26 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:70:y:2021:i:c:s0929119921001905

DOI: 10.1016/j.jcorpfin.2021.102068

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