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Riding out of a financial crisis: The joint effect of trust and corporate ownership

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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-indifferences 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.

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  • Mario Daniele Amore & Mircea Epure, 2020. "Riding out of a financial crisis: The joint effect of trust and corporate ownership," Economics Working Papers 1733, Department of Economics and Business, Universitat Pompeu Fabra.
    • Handle: RePEc:upf:upfgen:1733
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    Cited by:

    1. Mario Daniele Amore & Mircea Epure & Orsola Garofalo, 2023. "Organizational identity and performance: An inquiry into nonconforming company names," Economics Working Papers 1870, Department of Economics and Business, Universitat Pompeu Fabra.
    2. Chaudhary, Sanjay & Dhir, Amandeep & Ferraris, Alberto & Bertoldi, Bernando, 2021. "Trust and reputation in family businesses: A systematic literature review of past achievements and future promises," Journal of Business Research, Elsevier, vol. 137(C), pages 143-161.
    3. Amore, Mario Daniele & Pelucco, Valerio & Quarato, Fabio, 2022. "Family ownership during the Covid-19 pandemic," Journal of Banking & Finance, Elsevier, vol. 135(C).

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    More about this item

    Keywords

    trust; trade financing; Family firms; financial crisis; performance;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • Z10 - Other Special Topics - - Cultural Economics - - - General

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