Social capital and leasing

We examine the relationship between social capital and corporate leasing intensity. Using a large sample of publicly traded US firms, we find that firms headquartered in areas with high social capital lease less. The negative association is driven by both the social norms and social network components of social capital. Our channel analysis reveals that social capital has both a direct and an indirect effect on leasing, with the direct effect being significantly stronger. The indirect effect is due to social capital reducing financing constraints. • Firms headquartered in areas with high social capital lease less. • Both social norms and social network components of social capital drive this association. • Increased social capital leads to a substitution effect between leasing and debt financing. • Social capital affects leasing directly but also via a mediation effect where financing constraints are reduced.