Abstract Under the background of supply-side structural reform and the implementation of socialist core values and based on the data of Shanghai and Shenzhen A-share non-financial listed companies from 2010 to 2017, this paper empirically tests the impact of social trust on the cost of equity capital, and also uses the intermediary effect model to explore their the mechanism. There are following findings: (1) Social trust can significantly reduce the cost of equity capital. (2) The intermediary mechanism shows that social trust can alleviate the degree of information asymmetry and reduce the cost of equity capital by improving the transparency of financial information and stock liquidity. (3) The legal environment and social trust complement each other. In areas where the legal environment is better, the effect of social trust in reducing the cost of equity capital is more obvious. This study clarifies the relationship and mechanism between social trust and the cost of equity capital, provides an explanation from the informal system of social trust for companies to reduce the cost of equity capital. It also provides empirical evidence for the government to actively foster a trusting environment.
2021, Vol. 38 
