Disentangling the effect of Trust on Bank Lending

Christina Nicolas, Amine Tarazi and Gamze Ozturk Danisman

Journal of Economic Behavior & Organization, 2023, vol. 210, issue C, 360-378

Abstract: This paper studies the effect of trust on bank lending using a sample of commercial banks in 34 countries around the world. We distinguish between two forms of trust: In-group trust, which we define as the trust in people we know, and Out-group trust, which we define as the trust in people we meet for the first time. We find that Out-group trust is positively and significantly associated with bank lending. A closer look shows that this effect only holds in countries with relatively lower levels of formal institutional and judicial development. As for In-group trust, we find that its influence on bank lending is dependent on the level of informal lending available in each country. Overall, this paper provides novel evidence on the importance of trust and the different mechanisms by which it influences bank lending around the world.

Keywords: Bank Lending; Informal Lending; Trust; Institutional Development (search for similar items in EconPapers)
JEL-codes: G21 G28 G32 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0167268123001233
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Disentangling the effect of Trust on Bank Lending (2023)
Working Paper: Disentangling the effect of Trust on Bank Lending (2019)
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:eee:jeborg:v:210:y:2023:i:c:p:360-378

DOI: 10.1016/j.jebo.2023.04.021

Access Statistics for this article

Journal of Economic Behavior & Organization is currently edited by Houser, D. and Puzzello, D.

More articles in Journal of Economic Behavior & Organization from Elsevier
Bibliographic data for series maintained by Catherine Liu ().