Why do banks behave seemingly at odds with financial theory when making credit decisions? This book starts out investigating what financial and legal theory would predict about decision making in commercial banks. Through field studies and cross-country quantitative analysis, it finds that the trust people have in each other and institutions around them matter more than the measurable qualities of firm, industry, economic context, or legal environment. The effects of political stability, corruption, history, administrative tradition, and modernity all provide new light on how credit is...