Trust and Stock Price Synchronicity: Evidence from China

Baoyin Qiu (), Junli Yu () and Kuo Zhang ()
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Baoyin Qiu: Shanghai University of Finance and Economics
Junli Yu: Shanghai Jiao Tong University
Kuo Zhang: Shanghai Jiao Tong University

Journal of Business Ethics, 2020, vol. 167, issue 1, No 8, 97-109

Abstract: Abstract This paper investigates how social trust affects stock price synchronicity using a large sample of listed firms in China. We propose and provide evidence that social trust has a significantly positive impact on the amount of firm-specific information capitalized into stock prices. Further analyses indicate that firms located in regions of high social trust tend to have a smaller stock price crash risk and are less likely to engage in opportunistic behaviors than those in low-trust regions. Moreover, the positive role of trust in increasing firm-specific return variations and discouraging corporate misbehaviors is more pronounced for SOEs than Non-SOEs. Evidence from 2SLS regressions supports a causal impact of social trust on stock price synchronicity.

Keywords: Stock price synchronicity; Social trust; Firm-specific information; SOEs; Urban governance (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (36)

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DOI: 10.1007/s10551-019-04156-1

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