Abstract

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.