Riding out of a financial crisis: The joint effect of trust and corporate ownership |
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Authors: | Mario Daniele Amore Mircea Epure |
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Affiliation: | 1. Department of Management and Technology, Bocconi University and CEPR, Via Roentgen 1-2, 20136, Milan, Italy;2. Department of Economics and Business, Universitat Pompeu Fabra and Barcelona GSE, Ramon Trias Fargas 25-27, 08005, Barcelona, Spain;3. UPF Barcelona School of Management, Spain |
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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-in-differences 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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