We therefore control for regional GDP per capita and the college share of a region’s population to capture these general equilibrium forces, and argue that residual variation in trust across regions, conditional on their level of development, should more precisely target differences in the differential cost to hiring professional managers relative to family ones.

# III. DATA

Our data come from several sources.

## **_III.A. Bureau van Dijk Amadeus_**

Firm-level data comes from Bureau van Dijk’s (BvD) Amadeus dataset for 2011. This database collects standardized data from over 50 countries across Western Europe, Eastern Europe and Central Asia. The source for the data is generally the official company registrar office in each country, which requires all incorporated firms to submit annual company filings. The database includes standardized financial accounts data, although variable availability differs across countries. This database was also used by Bloom and Van Reenen (2007) as the sampling frame for the WMS and we will use this dataset to cross-check our classification of “family-owned family-managed” firms.<sup>14</sup> The region of each firm is also reported, although the granularity of this data varies by country. We query the Google Maps API to find a full set of regional identifiers that enable us to assign firms to regions reported in other datasets.<sup>15</sup> Following Klapper, Laeven and Rajan (2006), we restrict our sample according to several criteria in order to ensure cross-country comparability. First, we include only private limited liability companies, since these firms are almost always required to file statements (coverage of other types of firms is uneven).<sup>16</sup> Second, we restrict our sample to manufacturing, retail and services industries. Third, we drop firms with less than 10 employees. This removes some of the cross-country variance regarding reporting requirements for small firms, and removes suspicious listings which may be holding companies rather than active firms. Finally, we drop firms with more than 5000 employees to trim outliers.<sup>17</sup> We relax these assumptions in robustness checks in Section V.C. to show that none of them drive our main results.

The unique attribute of the BvD dataset for our purposes is that it provides ownership and management information at the firm-level, compiled from the accounts data from official sources. Importantly, BvD harmonizes job title descriptions across countries to define managers as “individuals actively working for/in the company on a daily basis, who deal with current affairs on an executive point of view, but who do not necessarily sit at the table of the board of directors”. This emphasis on defining managers as part of the active workforce of a company, rather than board members or directors for example, is crucial since it maps directly to the notion of management used in our model. Moreover, BvD manually matches country-

> 14We thank Daniela Scur for helping us link the firms in our dataset with those in the WMS.

> 15For example, in some countries only the city is reported which is much finer than the geography available in other datasets. By querying the list of cities in Google Maps, we retrieve the generic address for the city that includes the full list of regional identifiers (e.g. country, state, municipality and city).

> 16

> 17

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