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Financial Impact of Trust and Institutional Quality around the World

Author

Listed:
  • Svatopluk Kapounek

    (Mendel University in Brno, Faculty of Business and Economics, Czech Republic)

  • Evzen Kocenda

    (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic)

  • Ludek Kouba

    (Mendel University in Brno, Faculty of Business and Economics, Czech Republic)

Abstract

We investigate the financial impact of social trust, institutional quality, and regulations. As a testing ground we employ a unique, large, and hand-crafted dataset of more than 850 000 lending-based crowdfunding projects from 155 platforms across 55 countries during 2005-2018. We show that the impact of social trust is positive but economically less pronounced than that of institutional trust proxied by legal and property rights protection and regulation. Moreover, the financial impact of social trust is greater at the national level, while impact of institutional quality dominates at the international level. Nevertheless, the financial impact of trust and institutional quality around the world is positive, which is an encouraging implication under increasing anonymity and internationalization of financial environment.

Suggested Citation

  • Svatopluk Kapounek & Evzen Kocenda & Ludek Kouba, 2022. "Financial Impact of Trust and Institutional Quality around the World," Working Papers IES 2022/28, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Dec 2022.
    • Handle: RePEc:fau:wpaper:wp2022_28
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    File URL: https://ies.fsv.cuni.cz/en/research/working-papers/6715
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    More about this item

    Keywords

    social capital; social trust; institutional trust; uncertainty; crowdfunding; financial markets;
    All these keywords.

    JEL classification:

    • A13 - General Economics and Teaching - - General Economics - - - Relation of Economics to Social Values
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • K11 - Law and Economics - - Basic Areas of Law - - - Property Law

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