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Trust and delegation: Theory and evidence

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  • Gur, Nurullah
  • Bjørnskov, Christian

Abstract

Social trust is associated with good economic performance, but little is known about the transmission mechanisms connecting trust and performance. We explore the effect of trust on delegation decisions. In a theoretical framework, we note that delegation is a low-cost option when management decisions can be implemented without monitoring. This option is, however, risky and more likely to be profitable in higher-trust environments. In a set of cross-country regressions, we show a strong association between trust and delegation, which is increasing in economic sophistication.

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  • Gur, Nurullah & Bjørnskov, Christian, 2017. "Trust and delegation: Theory and evidence," Journal of Comparative Economics, Elsevier, vol. 45(3), pages 644-657.
    • Handle: RePEc:eee:jcecon:v:45:y:2017:i:3:p:644-657
    DOI: 10.1016/j.jce.2016.02.002
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    2. Amore, Mario Daniele & Epure, Mircea, 2021. "Riding out of a financial crisis: The joint effect of trust and corporate ownership," Journal of Comparative Economics, Elsevier, vol. 49(1), pages 92-109.
    3. Gu, Leilei & Liu, Zhongyang & Ma, Sichao & Wang, Hongyu, 2022. "Social trust and corporate financial asset holdings: Evidence from China," International Review of Financial Analysis, Elsevier, vol. 82(C).
    4. Brandon N. Cline & Claudia R. Williamson & Haoyang Xiong, 2022. "Trust, regulation, and market efficiency," Public Choice, Springer, vol. 190(3), pages 427-456, March.
    5. Zuo, Jingjing & Huang, Changqing & Qiu, Baoyin & Mai, Ruidong, 2023. "The construction of social credit system and corporate innovation: Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 81(C).
    6. Niclas Berggren & Christian Bjørnskov, 2017. "The Market‐Promoting and Market‐Preserving Role of Social Trust in Reforms of Policies and Institutions," Southern Economic Journal, John Wiley & Sons, vol. 84(1), pages 3-25, July.
    7. Raphael Boleslavsky & Bruce Carlin & Christopher Cotton, 2019. "Disincentive Effects of Evaluation," Working Paper 1410, Economics Department, Queen's University.
    8. Luca Corazzini & Christopher Cotton & Tommaso Reggiani, 2020. "Delegation and coordination with multiple threshold public goods: experimental evidence," Experimental Economics, Springer;Economic Science Association, vol. 23(4), pages 1030-1068, December.
    9. Mevlut Tatliyer & Nurullah Gur, 2022. "Individualism and Working Hours: Macro-Level Evidence," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 159(2), pages 733-755, January.

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    More about this item

    Keywords

    Social trust; Economic development; Delegation;
    All these keywords.

    JEL classification:

    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

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