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Title: Bowling alone, bowling together : is social capital priced in bank loans?
Authors: Cheng, CSA 
Wang, J
Zhang, N
Zhao, S
Issue Date: 1-Oct-2017
Source: Journal of accounting, auditing and finance, 1 Oct. 2017, v. 32, no. 4, p. 449-479
Abstract: We investigate whether the societal-level social capital enjoyed by firms affects the cost of their bank loans. Employing a measure of societal-level social capital for U.S. counties, we find that firms with higher societal-level social capital are associated with lower loan spreads. To further identify causality, we explore two events: Using a sample of firms that relocate their headquarters for tax reasons, we find that firms that move to lower (higher) social capital counties experience a higher (lower) cost of bank loans following relocations. The second event was the terrorist attack on September 11, 2001. After the disaster, social capital in affected counties—mainly in the State of New York, the State of Virginia, and adjacent counties—increased through social capital building efforts. We show that firms headquartered in the affected counties experience significantly lower loan spreads than other firms after the attack. Our findings contribute to the understanding of how societallevel social capital promotes economic development through its impact on financing costs.
Keywords: Loan spreads
Private debt
Social norms and networks
Societal level
Publisher: SAGE Publications
Journal: Journal of accounting, auditing and finance 
ISSN: 0148-558X
DOI: 10.1177/0148558X17724890
Rights: This is the accepted version of the publication Cheng, C. A., Wang, J., Zhang, N., & Zhao, S. (2017). Bowling Alone, Bowling Together: Is social capital priced in bank loans?. Journal of Accounting, Auditing & Finance (Volume Number 32 and Issue Number 4) pp. 449-479. Copyright © 2017 (The Author(s)). DOI: 10.1177/0148558X17724890
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