The Importance of Trust for Investment: Evidence from Venture Capital /
Bottazzi, Laura.
The Importance of Trust for Investment: Evidence from Venture Capital / Laura Bottazzi, Marco Da Rin, Thomas F. Hellmann. - Cambridge, Mass. National Bureau of Economic Research 2011. - 1 online resource: illustrations (black and white); - NBER working paper series no. w16923 . - Working Paper Series (National Bureau of Economic Research) no. w16923. .
April 2011.
We examine the effect of trust on financial investment and contracting decisions in a micro-economic environment where trust is exogenous. Using hand-collected data on European venture capital, we show that the Eurobarometer measure of trust among nations significantly affects investment decisions. This holds even after controlling for investor and company fixed effects, geographic distance, information and transaction costs. The national identity of venture capital firms' individual partners further contributes to the effect of trust. Education and work experience reduce the effect of trust but do not eliminate it. We also examine the relationship between trust and sophisticated contracts involving contingent control rights and find that, even after controlling for endogeneity, they are complements, not substitutes.
System requirements: Adobe [Acrobat] Reader required for PDF files.
Mode of access: World Wide Web.
The Importance of Trust for Investment: Evidence from Venture Capital / Laura Bottazzi, Marco Da Rin, Thomas F. Hellmann. - Cambridge, Mass. National Bureau of Economic Research 2011. - 1 online resource: illustrations (black and white); - NBER working paper series no. w16923 . - Working Paper Series (National Bureau of Economic Research) no. w16923. .
April 2011.
We examine the effect of trust on financial investment and contracting decisions in a micro-economic environment where trust is exogenous. Using hand-collected data on European venture capital, we show that the Eurobarometer measure of trust among nations significantly affects investment decisions. This holds even after controlling for investor and company fixed effects, geographic distance, information and transaction costs. The national identity of venture capital firms' individual partners further contributes to the effect of trust. Education and work experience reduce the effect of trust but do not eliminate it. We also examine the relationship between trust and sophisticated contracts involving contingent control rights and find that, even after controlling for endogeneity, they are complements, not substitutes.
System requirements: Adobe [Acrobat] Reader required for PDF files.
Mode of access: World Wide Web.