Is It Worth Trusting Your Manager?

39 Pages Posted: 26 Sep 2015 Last revised: 23 Mar 2016

See all articles by Elena Kulchina

Elena Kulchina

North Carolina State University; Duke University; Duke Innovation & Entrepreneurship Initiative

Date Written: January 1, 2016


Recent work has emphasized that trust between parties may sustain relational governance, but we need further understanding and empirical evidence of the role of trust in principal-agent relationships. Our paper contributes to the literature by focusing on the asymmetry of trust between an owner and a manager, which may for example arise because owners and managers come from regions with different trust levels. We find that a firm does almost equally well when the owner and the managers come from regions with equal trust (equal trust) and when the owner comes from a region with higher trust (over-trust). However, firm performance is significantly lower when the owner comes from a region with lower trust than that of the manager (under-trust). Moreover, this negative effect is particularly strong when communication between an owner and a manager is more difficult and when the difference in trust is less evident up front.

Keywords: entrepreneurs, top managers, trust, firm performance

JEL Classification: M1, M13, F22, F23

Suggested Citation

Kulchina, Elena and Kulchina, Elena, Is It Worth Trusting Your Manager? (January 1, 2016). Available at SSRN: or

Elena Kulchina (Contact Author)

North Carolina State University ( email )

Hillsborough Street
Raleigh, NC 27695
United States

Duke University ( email )

100 Fuqua Drive
Durham, NC 27708-0204
United States

Duke Innovation & Entrepreneurship Initiative

215 Morris St., Suite 300
Durham, NC 27701
United States

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