| Abstract: |
Prior research indicates that social capital constrains opportunistic behavior and facilitates cooperation in bilateral relationships (Coleman 1988; Guiso 2010). We hypothesize that firms conducting business with high social capital customers are perceived by their banks as having a lower supply chain risk and document a negative association between suppliers’ loan spreads and the social capital of their major customers. Our cross-sectional analyses show that the negative association is stronger when: 1) suppliers make more significant relationship-specific investments or have weaker bargaining power; and 2) customers operate in industries characterized by more opaque information environment. Further analyses reveal that customers’ social capital has a positive impact on their supplier firms' non-pricing loan terms. Taken together, our findings indicate that suppliers reap the benefits from the positive externalities of their customers’ social capital by obtaining lower borrowing costs and more favorable non-pricing loan terms.
Keywords: Social capital; Supply chain risk; Cost of debt; Trust; Hold-up problem
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Biography:
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Associate Professor Guan Yuyan is the Deputy Head of the Division of Accounting at Nanyang Business School. She obtained her B.A. from Xiamen University, MBA from University of Miami, and Ph.D. from University of Toronto. She is a member of CPA Australia. Her current research focuses on the production and use of accounting and financial information in the capital market, aiming at deriving empirical implications for investors, practitioners, and regulators. Prof. Guan has research work published in Journal of Accounting Research, Journal of Accounting and Economics, The Accounting Review, Management Science, Review of Accounting Studies, Contemporary Accounting Research, Journal of Corporate Finance, Journal of Business and Finance, Journal of Accounting and Public Policy, and Journal of Accounting Auditing and Finance, etc. Prof. Guan has been an Associate Editor for Asia-Pacific Journal of Accounting and Economics since October 2017 and was on the editorial board of the International Journal of Accounting from November 2012 to October 2017.
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