Working Paper: NBER ID: w22153
Authors: Ross Levine; Chen Lin; Wensi Xie
Abstract: Are firms more resilient to systemic banking crises in economies with higher levels of social trust? Using firm-level data in 34 countries from 1990 through 2011, we find that liquidity-dependent firms in high-trust countries obtain more trade credit and suffer smaller drops in profits and employment during banking crises than similar firms in low-trust economies. The results are consistent with the view that when banking crises block the normal banking-lending channel, greater social trust facilitates access to informal finance, cushioning the effects of these crises on corporate profits and employment.
Keywords: social trust; banking crises; trade credit; corporate resilience
JEL Codes: D22; G01; G21; G32; Z13
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| social trust (Z13) | trade credit (F19) |
| social trust (Z13) | profitability (L21) |
| social trust (Z13) | employment (J68) |
| trade credit (F19) | profitability (L21) |
| trade credit (F19) | employment (J68) |
| social trust + crisis dummy (H12) | trade credit (F19) |
| social trust + crisis dummy (H12) | profitability (L21) |
| social trust + crisis dummy (H12) | employment (J68) |