Social capital and capital structure

Richard P. Gregory

Journal of Sustainable Finance & Investment, 2022, vol. 12, issue 2, 655-668

Abstract: The nature of how capital structure can affect firm value is often investigated in the discipline of financial economics. Less investigated is how the nature of the type of assets can affect the choice of capital structure! I demonstrate that in the context of a Modigliani-Miller-type model that a firm financing social capital and physical capital will favor equity financing over debt financing without bankruptcy. With bankruptcy, debt financing will be used, but equity financing will be favored by firms that use large amounts of social capital, as it will increase their value. This demonstrates that social capital alters the financing relationship and helps to explain the preference of firms for equity financing.

Date: 2022
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/20430795.2020.1796418 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:jsustf:v:12:y:2022:i:2:p:655-668

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/TSFI20

DOI: 10.1080/20430795.2020.1796418

Access Statistics for this article

Journal of Sustainable Finance & Investment is currently edited by Dr Matthew Haigh

More articles in Journal of Sustainable Finance & Investment from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().