Societal trust and firm-level trust: Substitute or complement? An international evidence

Cheng Zhang, Kung-Cheng Ho, Cheng Yan and Yujing Gong

International Review of Financial Analysis, 2023, vol. 86, issue C

Abstract: Using an international sample of 30,060 observations of firms from 32 countries, covering the period from 2004 to 2018, combined with a country-level index for societal trust, this study provides evidence that societal trust is negatively associated with corporate social responsibility (CSR), which in turn is a proxy for firm-level corporate trust-building investment. Further analyses show that firms in low-trust countries tend to invest more in CSR when they are owned by large foreign shareholders originating from low-trust countries. The negative impact of societal trust on CSR is pronounced for firms located in less stable countries. Overall, the results suggest that societal trust acts as a substitute to firm-level trust. From the perspective of risk management, the results confirm this study's argument that the marginal benefits of CSR-as-insurance are more crucial for firms located in low-trust countries.

Keywords: Societal trust; CSR; Social capital; Risk management (search for similar items in EconPapers)
JEL-codes: F39 G32 G41 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:86:y:2023:i:c:s1057521923000595

DOI: 10.1016/j.irfa.2023.102543

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