Impacts of social trust on corporate leverage: Evidence from China

Ming Jin, Jinshan Liu and Zhongfei Chen

International Review of Economics & Finance, 2022, vol. 77, issue C, 505-521

Abstract: This study investigates the effects of social trust on corporate leverage in China with the data of listed companies and Chinese General Social Survey. Results reveal that social trust has a positive impact on corporate leverage, and this result remains robust when terrain is used as an instrumental variable. Social trust also further affects corporate leverage in central cities with high gross domestic product per capita, indicating that the impacts of social trust depend on local development as well. Social trust has similar impacts on long- and short-term leverage, but it does not affect commercial credit leverage like how it affects bank credit leverage. The possible channels are through the corporate responsibility to shareholder and local financial development. Another impact of social trust on leverage is through that of liabilities. Furthermore, improving local formal institutions may change the effects of social trust. Our results remain unchanged after robustness checks.

Keywords: Social trust; Informal institution; Corporate leverage (search for similar items in EconPapers)
JEL-codes: G11 G32 M14 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:77:y:2022:i:c:p:505-521

DOI: 10.1016/j.iref.2021.10.018

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