Reported estimates of the size premium vary widely across studies, countries, periods, and designs. We examine whether generalized trust and rule of law help account for that heterogeneity. We study 1,613 reported size-slope estimates from 105 studies and 31 countries, linking them to trust measures from the European Values Study and World Values Survey, and to rule of law from the Worldwide Governance Indicators. The meta-regressions control for study design, specification, precision, publication context, and market and macro-financial conditions; Bayesian model averaging assesses uncertainty over the control set. The more stable association is with rule of law, and it runs against the intuitive guess that better legal institutions shrink the premium: stronger rule of law is associated with more negative reported size slopes, hence larger conventional size premia, and the association survives dropping the United States. The trust association is conditional: higher generalized trust is linked to less negative reported slopes, and thus a weaker premium, where rule of law is weak, and it fades as rule of law strengthens. The conditional pattern is sign-consistent but imprecise under clustered inference and leans on the large U.S. share of the sample. Formal and informal institutions thus help organize part of the disagreement in this literature, although the analysis concerns variation in reported estimates and does not identify causal effects.

Fig: The disagreement the paper explains: reported size slopes differ sharply across countries




Reference: Schwarz Jiri, Havranek Tomas, Irsova Zuzana, Novak Jiri (2026), “Trust, Rule of Law, and the Size Premium: Evidence from a Meta-Analysis.” Anglo-American University and Charles University, Prague. Available at meta-analysis.cz/trust.