The Influence of Country-level Social Capital on Firms’ Cash Conversion Cycle

First, I examine the influence of country-level social capital on the cash conversion cycle. Consistent with moral hazard theory, social safety networks, and strong relationships among societal members that make up the social capital of a region, I find a positive association between social capital and the cash conversion cycle. In addition, I show that corporate risk-taking measures and the cost of capital mediate this relationship. I find unconstrained firms increase their cash conversion cycle days longer than constrained firms. Additionally, I show that corporate risk-taking and cost of capital are the transmission channels. Using data from 22 countries from 2007 to 2021, the results remain unchanged after controlling for firm and country characteristics, using a linear mixed model, and addressing endogeneity problems via instrumental variables. Also, the results still hold even after eliminating shocks like the 2007-2009 global financial crisis and the 2020-2021 COVID crisis from the sample period.