Abstract Prior evidence that social capital improves earnings quality does not address whether it reduces real earnings management, improves accounting conservatism, and consequently, lowers the cost of debt. This study provides evidence for these empirical questions. Based on the previous literature, I posit that firms headquartered in a county with better social environment, specifically higher social capital, are less likely to carry out misbehaviors because the social norms in these areas influence managers to be responsible and altruistic and the dense networks increase the cost of deviation behaviors. This study sheds light on the relationship between social capital and financial information. It extends the extant literature by hypothesizing that the mindset toward misconduct might be more constrained when social environment better. It also complements research in both the social capital and accounting streams.