Societal Trust and Information Timeliness: International Evidence

European Journal of Finance, Forthcoming

59 Pages Posted: 2 Feb 2024

See all articles by Rong Ding

Rong Ding

NEOMA Business School

Qiyu Zhang

University of Sussex Business School

wenhong ding

NEOMA Business School

Date Written: January 15, 2024

Abstract

We investigate the association between societal trust and the timeliness with which value-relevant information is incorporated into stock price with a large sample of observations collected from 38 countries between 2000 and 2019. We find that in high trust countries, positive (negative) value relevant information is impounded into stock price in a less (more) timely manner, mitigating imbalanced optimistically biased information timeliness (IOBIT). Results from robustness checks lend strong support to our inferences. Further analyses suggest that the relation between trust and IOBIT is more pronounced in emerging countries and in countries with weak investor protection, and lower levels of religiosity. The relation between trust and IOBIT is less pronounced in firms with strong corporate governance and lower managerial ability. Taken together, our study highlights the significant role that trust plays in affecting the efficiency of capital markets.

Keywords: Trust; Information timeliness; Imbalanced optimistically biased information timeliness (IOBIT); Corporate governance; Investor protection

JEL Classification: G14, G15, G28, G30

Suggested Citation

Ding, Rong and Zhang, Qiyu and ding, wenhong, Societal Trust and Information Timeliness: International Evidence (January 15, 2024). European Journal of Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=4695783 or http://dx.doi.org/10.2139/ssrn.4695783

Rong Ding

NEOMA Business School ( email )

1 RUE DU MARECHAL JUIN-BP215
MONT-SAINT-AIGNAN CEDEX, 76825
France

Qiyu Zhang (Contact Author)

University of Sussex Business School ( email )

Jubilee Building
Falmer
Brighton, BN1 9SN
United Kingdom

Wenhong Ding

NEOMA Business School ( email )

1 Rue du Maréchal Juin
Mont Saint Aignan Cedex, 76825
France

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