Social trust and the multi-layered enterprise equity structure

ABSTRACTSocial trust, as an informal mechanism, has an important influence on economic activities. With the Chinese A-share listed companies from 2007 to 2013 as samples, this paper make an examination of the influence of stoical trust on a multi-layered enterprise equity structure and its functioning mechanism. This study shows that the higher the social trust in a region where the enterprise is located, the fewer the layers of enterprise equity structure. Further examination of the functioning mechanism shows that on the one hand, there may be a more obvious phenomenon in a region with a relatively weak legal environment where the layers of enterprise equity structure decrease with the increase of social trust in the region. On the other hand, social trust influences a multi-layered enterprise equity structure by two paths, namely, debt financing cost and credit financing.