Impacts of trust on the cost of debt financing: The perspectives of in-group trust and out-group trust

Yidi Wang and Hongmei Gu

Finance Research Letters, 2024, vol. 62, issue PA

Abstract: This paper explores the impact of different types of trust on the cost of debt financing. Using trust data from the World Values Survey (WVS) and data on the listed companies in China, we find that in-group (out-group) trust has a positive (negative) impact on the cost of debt financing. We also establish that better corporate performance strengthens the impacts of the two types of trust, and higher external supervision weakens the impact of out-group trust. Further investigation finds that in-group (out-group) trust significantly impacts companies with weak (strong) financing constraints.

Keywords: Trust; The cost of debt financing; Corporate performance; External supervision (search for similar items in EconPapers)
JEL-codes: F22 G34 G38 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:62:y:2024:i:pa:s1544612324001818

DOI: 10.1016/j.frl.2024.105151

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