with productivity in this extension. This motivates an alternative specification where we use capital (defined as assets reported by the firm in the BvD dataset) to measure firm size in columns (6) and (12). The trust coefficient remains significant, and the interaction term just evades statistical significance with a p-value of 0.15. Taken together, this suggests our results are broadly robust to this alternative definition of firm size.

_Historical Political Institutions as a Driver of Trust._ Our baseline specifications include controls that attempt to capture unobservables that drive both firm behavior and trust, but we do not argue that variation in trust is truly exogenous. Rather, our empirics should be viewed as associations consistent with the model’s multiple predictions and thus support its narrative that legal institutions lower aggregate performance by causing more firms to sort into less productive family management. However, Tabellini (2010) argues that differences in historical institutions can provide exogenous variation in culture (one dimension of which is trust). The intuition is that cultural traditions are inherited from earlier generations, and weak political institutions can affect culture. Once we control for the direct effect of early institutions on contemporaneous outcomes,<sup>28</sup> he argues, the residual variation provides exogenous differences in culture today. The variable capturing early political institutions comes from his paper, and is the first principal component of five variables measuring “institutionalized constraints on the decision making powers of chief executives” in 1600, 1700, 1750, 1800, and 1850 from Acemoglu et. al. (2002).

While Tabellini (2010) a strong stage relationship between early institutions and his measure of culture (F-stat: 12.71), he finds a much weaker positive relationship with trust (F-stat: 4.84). We have a smaller sample of 38 regions which we concord between our two datasets, and find a similarly low first-stage relationship which renders our IV estimates insignificant. Instead, we show the reduced form relationship between early political institutions and family management (conditional on our baseline and historical controls) in our main specifications.

managed, while column (2) shows that this difference is attenuated for large firms. While we do not want to argue this measure is uncorrelated with any unobserved factors driving firm behavior in this paper, we believe this provides one more piece of evidence that the patterns we document in the data are not simply spurious.

_Using Within-Region Variation for Interaction Results._ Our baseline specifications use country fixed effects to identify the effect of differences in trust across regions within countries on firm behavior. However, for certain specifications where the coefficient of interest is an interaction of trust with other variables it is possible to include region fixed effects to use an even finer source of variation for identification (for example, comparing the effect of trust on management choices for small and large firms within a region). Table A3 in the online appendix reproduces our four main interaction specifications where this is possible. In most cases, the results are qualitatively unchanged when using this finer source of within-region variation

> 28The author uses urbanization rate in 1850 and school enrollment in 1960, which we include in our specifications.

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