Corporate valuation and trust

What is it about?

This paper analyses the influence of social capital on corporate valuation for a sample of 55 countries over the period 1995-2012. The results suggest that social capital is an important determinant of corporate valuation. Interpersonal trust and civic cooperation enhance corporate valuation, even though other institutional and legal characteristics are considered. Furthermore, our results reveal that corporate valuation increases with the GDP annual growth rate, legal enforcement and the protection of shareholders' rights, but that it is negatively affected by corruption and protection of creditors' rights. We also obtain some evidence suggesting that civic cooperation has a greater influence over corporate valuation in poorer countries.

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Photo by Dave Lowe on Unsplash

Photo by Dave Lowe on Unsplash

Why is it important?

We extend the empirical literature on cross-country corporate valuation, considering the effect of the social capital of each country. Our results suggest that social capital is important as a determinant of corporate valuation even when institutional and legal determinants are considered.

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