Trust and the regulation of corporate self-dealing

Cline, Brandon N.; Williamson, Claudia R.

doi:10.1016/j.jcorpfin.2016.07.016

Cited by 61 publications

(28 citation statements)

References 62 publications

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“…Results show that culture affects dividend smoothing (Javakhadze, Ferris, & Sen, 2014), firm value, and performance (Fauver, McDonald, & Taboada, 2018). Moreover, trust operates as a substitute for formal shareholder protection, limiting self‐dealing behavior and increasing corporate cash holdings (Dudley & Zhang, 2016) and financial development (Cline & Williamson, 2016).…”

Section: Resultsmentioning

confidence: 99%

Corporate governance and institutions—A review and research agenda

Zattoni

Dedoulis

Leventis

et al. 2020

Corporate Governance

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Research Question/Issue Over the last decades, research on the relationship between national institutions, governance mechanisms, and firm outcomes has been increasing. This review aims at (i) analyzing extant research in this area, (ii) identifying influential current trends, and (iii) highlighting future avenues of research. Research Findings/Insights Using a content analysis of 165 articles published in top journals from accounting, finance, management, and organization disciplines, we explore research on institutions, corporate governance, and firm outcomes. Our results show that stronger national institutions aimed at protecting investors are mostly associated with better corporate governance and firm financial outcomes and that these relationships are moderated by some contingency factors. Theoretical/Academic Implications Our findings encourage scholars to further explore the relationship between national institutions, corporate governance, and firm outcomes by using theoretical frameworks and methods allowing them (i) to develop a “thicker” understanding of the national institutional context, (ii) to analyze powerful stakeholders' influence on the above relationships, and (iii) to better understand the role played by informal institutions. Practitioner/Policy Implications Our findings help policymakers and investors to (i) better understand how national institutions impact on both governance mechanisms and firm outcomes and (ii) develop policies or design governance mechanisms taking into consideration country‐, industry‐, and firm‐level contingencies.

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Section: Resultsmentioning

confidence: 99%

Corporate governance and institutions—A review and research agenda

Zattoni

Dedoulis

Leventis

et al. 2020

Corporate Governance

View full text Add to dashboard Cite

show abstract

“…This conclusion is robust to controlling for endogeneity using instrumental variable (IV) estimation. We instrument for trust with genetic distance and pronoun drop, two exogenous variables commonly used in the literature to proxy for trust (Bjørnskov, 2012;Cline & Williamson, 2016;Guiso, Sapienza, & Zingales, 2009;Tabellini, 2008). The results suggest that endogeneity and attenuation biases can cause ordinary least squares (OLS) estimates to understate the role of trust in influencing contracting outcomes, since the coefficients from the IV estimation are larger than those in OLS models.…”

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confidence: 99%

“…1 Lastly, we contribute to a subset of studies illustrating that culture influences the adoption of regulation (Licht, Goldschmidt, & Schwartz, 2005;Stulz & Williamson, 2003). Cline and Williamson (2016) document that trust affects shareholder protection regulation and efficient financial development. Both Aghion et al (2010) and Pinotti (2012) show a negative association between trust and the regulation of the domestic entry of new firms.…”

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confidence: 99%

Trust, regulation, and contracting institutions

Cline

Williamson

2020

Euro Fin Management

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This paper demonstrates that trust directly influences contracting efficiency. We document that trust reduces demand for contract regulation and positively relates to a high‐quality contracting environment, supporting a substitution hypothesis. Furthermore, contract regulation no longer leads to poor contracting outcomes. These findings suggest that lack of trust significantly explains inefficient contracting institutions. Based on interaction effects, we note that trust could complement formal enforcement in countries with weak regulation. As regulation increases, trust substitutes for contract regulation. Overall, trust positively promotes efficient contracting by reducing burdensome regulation and providing an alternative to formal contract enforcement.

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“…Stulz and Williamson () find a causal association between religious affiliation and financial regulation. Licht, Goldschmidt, and Schwartz () and Cline and Williamson () document that national culture affects shareholder protection regulation. Both Aghion et al () and Pinotti () show a negative association between trust and regulation of domestic entry.…”

Section: Introductionmentioning

confidence: 99%

Open Borders for Business? Causes and Consequences of the Regulation of Foreign Entry

Davis

Williamson

2018

Southern Economic Journal

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While an extensive literature examines the regulation of entry by domestic firms, the causes and consequences of the regulation of entry by foreign firms have not been previously considered. First, we analyze the roles of culture, legal origin, democracy, and geographic openness as determinants of regulation of foreign entry. Strong evidence illustrates that more individualist cultures and geographically open countries regulate foreign entry less. Our findings also show that cultural values matter more in countries with common law traditions. In contrast, the association between democracy and the regulation of foreign entry is fragile. Next, we examine the consequences from foreign entry regulation. Evidence suggests a strong, negative, and economically significant association between the regulation of foreign entry and inward foreign direct investment (FDI). The regulation of domestic entry, however, is positively associated with FDI inflows. This result is robust to controlling for a variety of economic, cultural, and institutional variables.

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Trust and the regulation of corporate self-dealing

Cited by 61 publications

References 62 publications

Corporate governance and institutions—A review and research agenda

Corporate governance and institutions—A review and research agenda

Trust, regulation, and contracting institutions

Open Borders for Business? Causes and Consequences of the Regulation of Foreign Entry

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