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Trust and Stock Price Synchronicity: Evidence from China

  • Baoyin Qiu
  • Junli YuEmail author
  • Kuo Zhang
Original Paper

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 

Notes

Funding

This work was supported by the National Natural Science Foundation of China [No. 71702102,71472041].

Compliance with Ethical Standards

Conflict of interest

The author declares that they have no conflict of interest.

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Copyright information

© Springer Nature B.V. 2019

Authors and Affiliations

  1. 1.Postdoctoral Station of Business AdministrationShanghai University of Finance and EconomicsShanghaiChina
  2. 2.China Institute for Urban Governance\School of International and Public AffairsShanghai Jiao Tong UniversityShanghaiChina
  3. 3.Antai College of Economics and ManagementShanghai Jiao Tong UniversityShanghaiChina

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