The Importance of Trust for Investment: Evidence from Venture Capital (Replaced by DP 2010-49)
AbstractWe examine the effect of trust on financial investment and contracting decisions in a micro-economic environment where trust is exogenous. Using hand-collected data on European venture capital, we show that the Eurobarometer measure of trust among nations significantly affects investment decisions. This holds even after controlling for investor and company fixed effects, geographic distance, information and transaction costs. The national identity of venture capital firms’ individual partners further contributes to the effect of trust. Education and work experience reduce the effect of trust but do not eliminate it. We also examine the relationship between trust and sophisticated contracts involving contingent control rights and find that, even after controlling for endogeneity, they are complements, not substitutes.
Download InfoTo our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
Bibliographic InfoPaper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 2009-43.
Date of creation: 2009
Date of revision:
Contact details of provider:
Web page: http://center.uvt.nl
Venture Capital; Social Capital; Trust; Financial Contracts; Corporate Governance.;
Find related papers by JEL classification:
- G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
- G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
- K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
- M13 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - New Firms; Startups
This paper has been announced in the following NEP Reports:
- NEP-ACC-2009-06-10 (Accounting & Auditing)
- NEP-ALL-2009-06-10 (All new papers)
- NEP-BEC-2009-06-10 (Business Economics)
- NEP-CFN-2009-06-10 (Corporate Finance)
- NEP-EEC-2009-06-10 (European Economics)
- NEP-ENT-2009-06-10 (Entrepreneurship)
- NEP-SOC-2009-06-10 (Social Norms & Social Capital)
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Hale, Galina, 2012.
"Bank relationships, business cycles, and financial crises,"
Journal of International Economics,
Elsevier, vol. 88(2), pages 312-325.
- Galina Hale, 2011. "Bank Relationships, Business Cycles, and Financial Crises," NBER Chapters, in: Global Financial Crisis National Bureau of Economic Research, Inc.
- Galina Hale, 2011. "Bank Relationships, Business Cycles, and Financial Crises," NBER Working Papers 17356, National Bureau of Economic Research, Inc.
- Galina Hale, 2011. "Bank relationships, business cycles, and financial crisis," Working Paper Series 2011-14, Federal Reserve Bank of San Francisco.
- Mariassunta Giannetti & Yishay Yafeh, 2012.
"Do Cultural Differences Between Contracting Parties Matter? Evidence from Syndicated Bank Loans,"
INFORMS, vol. 58(2), pages 365-383, February.
- Giannetti, Mariassunta & Yafeh, Yishay, 2008. "Do Cultural Differences Between Contracting Parties Matter? Evidence from Syndicated Bank Loans," CEPR Discussion Papers 7020, C.E.P.R. Discussion Papers.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Richard Broekman).
If references are entirely missing, you can add them using this form.