Abstract
Abstract We examine the effect of managerial social capital on the firm's cost of equity capital. We argue that social ties alleviate information asymmetry and agency problems, which in turn leads to a decrease in the cost of equity. Using a large panel of companies from 52 countries over the period 1999–2012, we document that social capital inversely affects the cost of equity. Our evidence suggests that the association between social capital and the cost of equity capital is stronger in underdeveloped financial markets and those characterized by weak legal protection. The marginal effect of social capital is also stronger for constrained firms with profitable investment opportunities. Our results are robust to alternative model specifications and tests for endogeneity.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
