The impact of empowering investors on trust and trustworthiness

This paper uses a controlled laboratory environment and a two-person investment game in a multi-period setting to examine the impact of empowering investors with the right to veto the investee’s profit distribution on trust and trustworthiness. Two forms of vetoes are tested: the first is costly for the investor to implement and the second is costless. One of the key findings is that the empowerment of investors through both costless and costly …