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Trust and efficiency

Publication ,  Journal Article
Chami, R; Fullenkamp, C
Published in: Journal of Banking and Finance
August 23, 2002

Agency problems within the firm are a significant hindrance to efficiency. We propose trust between coworkers as a superior alternative to the standard tools used to mitigate agency problems: increased monitoring and incentive-based pay. We model trust as mutual, reciprocal altruism between pairs of coworkers and show how it induces employees to work harder, relative to those at firms that use the standard tools. In addition, we show that employees at trusting firms have higher job satisfaction, and that these firms enjoy lower labor cost and higher profits. We conclude by discussing how trust may also be easier to use within the firm than the standard agency-mitigation tools. © 2002 Elsevier Science B.V. All rights reserved.

Duke Scholars

Published In

Journal of Banking and Finance

DOI

ISSN

0378-4266

Publication Date

August 23, 2002

Volume

26

Issue

9

Start / End Page

1785 / 1809

Related Subject Headings

  • Finance
  • 4901 Applied mathematics
  • 3502 Banking, finance and investment
  • 1502 Banking, Finance and Investment
  • 1401 Economic Theory
  • 0102 Applied Mathematics
 

Citation

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Chami, R., & Fullenkamp, C. (2002). Trust and efficiency. Journal of Banking and Finance, 26(9), 1785–1809. https://doi.org/10.1016/S0378-4266(02)00191-7
Chami, R., and C. Fullenkamp. “Trust and efficiency.” Journal of Banking and Finance 26, no. 9 (August 23, 2002): 1785–1809. https://doi.org/10.1016/S0378-4266(02)00191-7.
Chami R, Fullenkamp C. Trust and efficiency. Journal of Banking and Finance. 2002 Aug 23;26(9):1785–809.
Chami, R., and C. Fullenkamp. “Trust and efficiency.” Journal of Banking and Finance, vol. 26, no. 9, Aug. 2002, pp. 1785–809. Scopus, doi:10.1016/S0378-4266(02)00191-7.
Chami R, Fullenkamp C. Trust and efficiency. Journal of Banking and Finance. 2002 Aug 23;26(9):1785–1809.
Journal cover image

Published In

Journal of Banking and Finance

DOI

ISSN

0378-4266

Publication Date

August 23, 2002

Volume

26

Issue

9

Start / End Page

1785 / 1809

Related Subject Headings

  • Finance
  • 4901 Applied mathematics
  • 3502 Banking, finance and investment
  • 1502 Banking, Finance and Investment
  • 1401 Economic Theory
  • 0102 Applied Mathematics