2. The Value of Country-Level Perceived Ethics to Entrepreneurs Around the World

The actions behind the “Great Recession” have done a lot of damage to the ability of the average investor to trust both corporate executives and Wall Street. Given the riskiness of investing in private equity, private firms are particularly vulnerable to the risk aversion of investors. For this reason, maintaining trust may be particularly useful to private firms. Using a dataset that spans 33 countries from 1998 to 2004, this paper examines the impact of the perception of ethical behavior at the country level on the performance and outcome of private firms. Using two separate sources for country-level perception of ethics, this paper finds that both the performance and the outcome of the private firm are positively influenced by the level of perceived ethics in their country. The paper further finds that these benefits come without adding cost to the entrepreneurial firm (as well as its pre-issue investors) when it goes public.