Trust and the Cost of Debt Financing

Meng, Yijun; Yin, Chao

doi:10.1016/j.intfin.2018.11.009

Trust and the Cost of Debt Financing

Meng, Yijun; Yin, Chao

Authors

Yijun Meng

Chao Yin

Abstract

This paper examines the relation between the level of trust in a country and the cost of debt. Using data on firms located in 22 countries over a 20-year period, we quantify the country trust level and find strong evidence that firms in countries with a higher level of societal trust have lower bond yield spreads. We also find that the impact of trust on the cost of debt is more pronounced in countries with a poor governance environment and during a time of financial crisis. Overall, our results highlight the role of social capital in shaping corporate financial behavior.

Citation

Meng, Y., & Yin, C. (2019). Trust and the Cost of Debt Financing. Journal of International Financial Markets, Institutions and Money, 59, 58-73. https://doi.org/10.1016/j.intfin.2018.11.009

Journal Article Type	Article
Acceptance Date	Nov 26, 2018
Online Publication Date	Nov 27, 2018
Publication Date	2019-06
Deposit Date	Jul 27, 2020
Publicly Available Date	Jul 28, 2020
Journal	Journal of International Financial Markets, Institutions and Money
Print ISSN	1042-4431
Publisher	Elsevier
Peer Reviewed	Peer Reviewed
Volume	59
Pages	58-73
DOI	https://doi.org/10.1016/j.intfin.2018.11.009
Public URL	https://durham-repository.worktribe.com/output/1265472
Related Public URLs	http://centaur.reading.ac.uk/80885/

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Publisher Licence URL
http://creativecommons.org/licenses/by-nc-nd/4.0/

Copyright Statement
© 2018 This manuscript version is made available under the CC-BY-NC-ND 4.0 license http://creativecommons.org/licenses/by-nc-nd/4.0/