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

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  • Mario Daniele Amore
  • Mircea Epure

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.

Suggested Citation

  • Mario Daniele Amore & Mircea Epure, 2020. "Riding Out of a Financial Crisis: The Joint Effect of Trust and Corporate Ownership," Working Papers 1194, Barcelona Graduate School of Economics.
  • Handle: RePEc:bge:wpaper:1194
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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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