Social trust and Corporate misconduct
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2025-07-04
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en
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This study examines whether social trust reduces corporate misconduct in the United States. A large panel of U.S. listed firms with economical information from the Compustat database is combined with regional trust scores from the World Values Survey and penalty data from the violation tracker database. Using mixed-effects regressions that account for firm, year, and industry dependence, this study finds a robust negative relation: higher social trust is associated with both lower monetary penalties and a smaller likelihood that firms receive any penalty at all. The effect is stronger in a subsample with detailed governance information. In contrast when a different proxy is used for social trust, that measures “trust in companies” no such negative relation is found, underscoring the importance of how trust is measured.
These results extend prior evidence from China to a Western, stronger institutionalized country, suggesting that social trust complements formal institutions instead of solely replacing them. The findings imply that regulators could use trust indicators in their inspections into corporate misconduct, and that local policy makers could focus on community initiatives aimed at strengthening local trust, in order to reduce corporate violations.
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Faculteit der Managementwetenschappen