Trust in Financial Markets: Evidence from Reactions to Earnings News

• 成果类型: Article
• 署名作者: Wei, Chishen; Zhang, Lei
• 署名单位: Hong Kong Polytechnic University; City University of Hong Kong
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2022.4569
• 发表日期: 2023
• 页码: 6393-6415
• 关键词: accounting; finance; asset pricing; ECONOMICS; behavior and behavioral decision making

摘要

This paper studies the effect of trust on the perceived credibility of earnings news. Using earnings response coefficients, we find that firms located in low-trust regions of the United States experience significantly lower stock price reactions to earnings news. Additional tests indicate that managers can counterbalance investors' dependence on trust by employing reputable auditors or signaling the quality of their earnings using dividends to improve the perceived credibility of their financial reports. Overall, our findings suggest that trust affects the pricing of earnings news in capital markets.