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The effect of social capital on financial capital

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  • Moshe Kim

    ()

  • Jordi Surroca

    ()

  • Josep A. Tribó

    ()

Abstract

We study the effect of social capital on financial capital. Specifically, we study how similarity (matching) of borrowers’ and lenders’ cohorts along their corporate social responsibility dimension affects the cost of debt financing. The main finding is that borrowers’ ethical posture alone is not enough for obtaining cheapest rates. Favorable loan conditions are obtained when both lenders and borrowers belong to similar cohorts attributing high value for social responsibility aspects. Employing an international database composed of 4,554 syndicated loans involving 175 corporations in 15 different countries for the period 2003-2006 we document a large and significant reduction in lending rates when both borrowers and lenders belong to similar cohort along the social responsibility dimension. These results withstand a battery of robustness tests.

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Bibliographic Info

Paper provided by Universidad Carlos III, Instituto sobre Desarrollo Empresarial "Carmen Vidal Ballester" in its series Business Economics Working Papers with number id-09-02.

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Date of creation: 2009
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Handle: RePEc:cte:idrepe:id-09-02

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Keywords: Corporate social responsibility; Financing costs; Lenders;

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