Institutional Quality, Trust, and Stock Market Participation: Learning to Forget

Hossein Asgharian (), Lu Liu and Frederik Lundtofte
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Hossein Asgharian: Department of Economics, Lund University, P. O. Box 7082, S-220 07 Lund, Sweden
Lu Liu: Stockholm Business School, Stockholm University, S-106 91 Stockholm, Sweden
Frederik Lundtofte: Aalborg University Business School, Fibigerstræde 2, DK-9220 Aalborg Øst, Denmark4Danish Finance Institute, Solbjerg Plads 3, DK-2000 Frederiksberg, Denmark

Quarterly Journal of Finance (QJF), 2024, vol. 14, issue 01, 1-31

Abstract: In this paper, we explore the relations among institutional quality, households’ level of trust, and stock market participation. We find that institutional quality has a significant impact on both trust and participation. The individual level of trust significantly affects participation, but trust plays a small role in the effect of institutional quality on participation. Further, we demonstrate that immigrants are affected by the institutional quality of both their country of residence and their home country, and that education emerges as an important learning factor in immigrants’ adaptation to new institutional environments.

Keywords: Households’ stock ownership; institutional quality; trust; immigration; direct and indirect effects; learning ability (search for similar items in EconPapers)
JEL-codes: D14 G51 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1142/S2010139224500022

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