IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

The Relationship between Trust and a Firm’s Access to Financing: Evidence from Transitional Countries

  • Afandi, Elvin
  • Kermani, Majid

In our study we investigate the association between inter-organizational trust and access to financing for 11,500 firms across transitional countries (including Turkey). The results of our study contribute to the stream of economic development literature in two primary ways. First, we show that the degree of prepayment demanded by private sector firms from their customers tends to be a good measure of (dis)trust in business transactions. In transitional countries, whether or not a private firm demands prepayment for its sales is found to be a strong indicator of (dis)trust for its customers and/or a lack of confidence in the contract enforcement at the country level. Second, and most importantly, our econometric analyses suggest that enterprises in countries with high levels of inter-firm trust are more likely to obtain bank loans and less likely to report access to financing as a major obstacle to their businesses. This result remains robust with the inclusion of many controls and various specification checks as well as econometric adjustments for the potential endogeneity of trust and access to financing.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://mpra.ub.uni-muenchen.de/46998/1/MPRA_paper_46998.pdf
File Function: original version
Download Restriction: no

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 46998.

as
in new window

Length:
Date of creation: 15 Dec 2012
Date of revision:
Handle: RePEc:pra:mprapa:46998
Contact details of provider: Postal: Schackstr. 4, D-80539 Munich, Germany
Phone: +49-(0)89-2180-2219
Fax: +49-(0)89-2180-3900
Web page: http://mpra.ub.uni-muenchen.de

More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Samuel Bowles & Herbert Gintis, 2001. "Social Capital and Community Governance," Working Papers 01-01-003, Santa Fe Institute.
  2. Simeon Djankov & Caralee McLiesh & Andrei Shleifer, 2005. "Private Credit in 129 Countries," NBER Working Papers 11078, National Bureau of Economic Research, Inc.
  3. Durlauf,S.N. & Fafchamps,M., 2004. "Social capital," Working papers 12, Wisconsin Madison - Social Systems.
    • Durlauf, Steven N. & Fafchamps, Marcel, 2005. "Social Capital," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 26, pages 1639-1699 Elsevier.
  4. Bonin, John P. & Hasan, Iftekhar & Wachtel, Paul, 2005. "Bank performance, efficiency and ownership in transition countries," Journal of Banking & Finance, Elsevier, vol. 29(1), pages 31-53, January.
  5. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2004. "The Role of Social Capital in Financial Development," American Economic Review, American Economic Association, vol. 94(3), pages 526-556, June.
  6. Martin Raiser & Alan Rousso & Franklin Steves, 2004. "Trust in Transition: Cross-country and Firm Evidence," Others 0401007, EconWPA.
  7. Demirguc-Kunt, Asli & Love, Inessa & Maksimovic, Vojislav, 2004. "Business Environment and the Incorporation Decision," Policy Research Working Paper Series 3317, The World Bank.
  8. Alberto Alesina & Eliana La Ferrara, 1999. "Participation in Heterogeneous Communities," NBER Working Papers 7155, National Bureau of Economic Research, Inc.
  9. RAFAEL LaPORTA & FLORENCIO LOPEZ-de-SILANES & ANDREI SHLEIFER & ROBERT W. VISHNY, . "Legal Determinants of External Finance,"," CRSP working papers 324, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
  10. Christian Bjørnskov, 2012. "How Does Social Trust Affect Economic Growth?," Southern Economic Journal, Southern Economic Association, vol. 78(4), pages 1346-1368, April.
  11. Demirgüç-Kunt, A. & Beck, T.H.L. & Honohan, P., 2008. "Finance for all? : Policies and pitfalls in expanding access," Other publications TiSEM aec73d3a-d6eb-457f-9182-3, Tilburg University, School of Economics and Management.
  12. Ghatak, Maitreesh, 1999. "Group lending, local information and peer selection," Journal of Development Economics, Elsevier, vol. 60(1), pages 27-50, October.
  13. Calderon, Cesar & Chong, Alberto & Galindo, Arturo, 2002. "Development and Efficiency of the Financial Sector and Links with Trust: Cross-Country Evidence," Economic Development and Cultural Change, University of Chicago Press, vol. 51(1), pages 189-204, October.
  14. Claessens, Stijn, 2006. "Access to financial services: a review of the issues and public policy objectives," Journal of Financial Transformation, Capco Institute, vol. 17, pages 16-19.
  15. Marcel Fafchamps, 2004. "Social Capital and Development," Economics Series Working Papers 214, University of Oxford, Department of Economics.
  16. Zak, Paul J & Knack, Stephen, 2001. "Trust and Growth," Economic Journal, Royal Economic Society, vol. 111(470), pages 295-321, April.
  17. Rose-Ackerman, Susan, 2001. "Trust and Honesty in Post-socialist Societies," Kyklos, Wiley Blackwell, vol. 54(2-3), pages 415-43.
  18. Thorsten Beck & Asli Demirgüç-Kunt, 2008. "Access to Finance: An Unfinished Agenda," World Bank Economic Review, World Bank Group, vol. 22(3), pages 383-396, November.
  19. La Ferrara, Eliana & Alesina, Alberto, 2000. "Participation in Heterogeneous Communities," Scholarly Articles 4551796, Harvard University Department of Economics.
  20. John F. Helliwell & Robert D. Putnam, 1995. "Economic Growth and Social Capital in Italy," Eastern Economic Journal, Eastern Economic Association, vol. 21(3), pages 295-307, Summer.
  21. Utku Teksoz, 2008. "Trust in Transition: Cross-Country and Firm Evidence," Journal of Law, Economics and Organization, Oxford University Press, vol. 24(2), pages 407-433, October.
  22. Ahlerup, Pelle & Olsson, Ola & Yanagizawa, David, 2007. "Social Capital vs Institutions in the Growth Process," Working Papers in Economics 248, University of Gothenburg, Department of Economics.
  23. Knack, Stephen & Keefer, Philip, 1997. "Does Social Capital Have an Economic Payoff? A Cross-Country Investigation," The Quarterly Journal of Economics, MIT Press, vol. 112(4), pages 1251-88, November.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:46998. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.