In Business Groups We Trust

Anaïs Hamelin, Vivien Lefebvre and Laurent Weill
Additional contact information
Vivien Lefebvre: LaRGE Research Center, Université de Strasbourg

Working Papers of LaRGE Research Center from Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg

Abstract: We investigate the impact of trust on the prevalence of business groups. Using firm-level information on group affiliation, we perform estimations on a large sample of 258,984 companies from twenty-five European countries. We find that higher trust is associated with a lower probability to be affiliated to a business group. Our findings accord with the hypothesis that higher trust diminishes the incentives for a firm to internalize transactions through the emergence of a business group. We also find limited evidence that the negative effect of trust on group affiliation is stronger for firms with higher information asymmetries. We furthermore conclude that trust is a substitute for the quality of formal institutions. Our work contributes to a better understanding of the reasons why business groups exist. It completes the institutional voids perspective by showing that informal institutions must be taken into account to understand the prevalence of business groups.

Keywords: business groups; trust. (search for similar items in EconPapers)
JEL-codes: G21 O16 (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-eur and nep-soc
References: Add references at CitEc
Citations:

Downloads: (external link)
http://ifs.u-strasbg.fr/large/publications/2020/2020-06.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:lar:wpaper:2020-06

Access Statistics for this paper

More papers in Working Papers of LaRGE Research Center from Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg Contact information at EDIRC.
Bibliographic data for series maintained by Christophe J. Godlewski ().