Riding Out of a Financial Crisis: The Joint Effect of Trust and Corporate Ownership

43 Pages Posted: 16 May 2017 Last revised: 15 Jul 2020

See all articles by Mario Daniele Amore

Mario Daniele Amore

Bocconi University - Department of Management and Technology

Mircea Epure

Universitat Pompeu Fabra - Department of Economics and Business; Barcelona Graduate School of Economics (Barcelona GSE)

Date Written: July 13, 2020

Abstract

We study how generalized trust shapes the ability of firms with different ownership forms to obtain trade financing and perform during a financial crisis. Exploiting geographic variations in trust across Italian regions and the occurrence of the 2008-09 financial crisis in a difference-in-differences setting, we show that generalized trust makes family firms less able to obtain trade financing during the crisis. This finding maps into performance results: trust alleviates the negative effect of a crisis for non-family firms, while it aggravates the negative effect for family firms. This latter result depends crucially on a firm’s corporate governance: trust does not harm family firms whose board is open to non-family directors. Collectively, our findings illustrate how culture interacts with corporate attributes in shaping a firm’s prospects.

Keywords: trust, trade financing, family firms, financial crisis, performance

JEL Classification: G32, G34, Z10

Suggested Citation

Amore, Mario Daniele and Epure, Mircea, Riding Out of a Financial Crisis: The Joint Effect of Trust and Corporate Ownership (July 13, 2020). Journal of Comparative Economics, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2968889 or http://dx.doi.org/10.2139/ssrn.2968889

Mario Daniele Amore

Bocconi University - Department of Management and Technology ( email )

Via Roentgen 1
Milan, MI 20136
Italy

Mircea Epure (Contact Author)

Universitat Pompeu Fabra - Department of Economics and Business ( email )

Ramon Trias Fargas 25-27
Barcelona, 08005
Spain

HOME PAGE: http://mirceaepure.com

Barcelona Graduate School of Economics (Barcelona GSE)

Ramon Trias Fargas, 25-27
Barcelona, Barcelona 08005
Spain

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