Work

Modelling trust evolution within small business lending relationships

Year: 2018

Type: article

Abstract: Trust is a key dimension in the principal-agent relationship and it has been studied extensively. However, the dynamics, evolution, and intrinsic motivation and mechanisms have received less attention. This paper investigates the intrinsic motivation of trust and it proposes a theoretical model of trust evolution that is based on the notion of ‘trust response’ and ‘trust spiral’. We then specifically focus on trust within the lending relationship between banks and small businesses, and we run numerical simulations to further illustrate the evolution of involved mutual trust over time. Our model provides implications for future research in both trust evolution and small business lending relationships.

Source: Financial Innovation

DOI: 10.1186/s40854-018-0105-1

Authors: Ying Tang, Andrea Moro, Sandro Sozzo, Zhiyong Li

Institutions: Southwestern University of Finance and Economics, Cranfield University, University of Leicester

Language: English

Topic: Banking stability, regulation, efficiency

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: diamond

Funder: National Natural Science Foundation of China

Award: G4649959762