In Your Face We Trust? Trust and Information Production in Financial Markets

48 Pages Posted: 26 May 2021 Last revised: 19 Oct 2022

See all articles by Kejing Chen

Kejing Chen

Dongbei University of Finance & Economics

J. Daniel Chi

University of Nevada, Las Vegas (UNLV) - Department of Finance

Wenqi Guo

University of Leeds

Stephan Siegel

University of Washington - Michael G. Foster School of Business; CESifo

Date Written: September 8, 2022

Abstract

Do corporate managers reveal more information to stock analysts who appear more
trustworthy? Do these analysts provide forecasts and recommendations that contain more
information? The answer is yes and yes. Analysts who appear more trustworthy are more
likely to be received by firms for site visits, during which they are more likely to meet with
high-ranking managers. These meetings are 10% more informative, and these analysts’
earnings forecasts are 30% more accurate. Their stock recommendations also generate
greater market reactions. The effect of facial trustworthiness is more pronounced when the
analyst is relatively unknown to the manager, such as when the analyst is new to the
profession or when the analyst and the firm manager do not share a similar background.
The effect is also more pronounced when the level of social trust is low.

Keywords: trust, trustworthiness, facial features, analyst, information production, financial markets

JEL Classification: G14, G24, G40, D83

Suggested Citation

Chen, Kejing and Chi, Jianxin Daniel and Guo, Wenqi and Siegel, Stephan, In Your Face We Trust? Trust and Information Production in Financial Markets (September 8, 2022). Available at SSRN: https://ssrn.com/abstract=3853393 or http://dx.doi.org/10.2139/ssrn.3853393

Kejing Chen (Contact Author)

Dongbei University of Finance & Economics ( email )

Dalian
China

Jianxin Daniel Chi

University of Nevada, Las Vegas (UNLV) - Department of Finance ( email )

4505 S. Maryland Parkway
Box 456008
Las Vegas, NV 89154-6008
United States

HOME PAGE: http://www.unlv.edu/people/jianxin-chi

Wenqi Guo

University of Leeds ( email )

Leeds, LS2 9JT
United Kingdom

Stephan Siegel

University of Washington - Michael G. Foster School of Business ( email )

Box 353200
Seattle, WA 98195-3200
United States

HOME PAGE: http://faculty.washington.edu/ss1110/

CESifo ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

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