The role of Trust on the Reaction of Investors against Announcement of Profit by Emphasizing on the Requirements of Official Institutions and Information Asymmetry

Document Type : Original Article

Authors

10.22034/iaar.2015.103909

Abstract

Among the information provided by business units, profit information enjoy a special position as an important channel between investors and managers. Considering the separation of ownership from management and the motivation of managers to hide actual performance of business units, there are several impediments for arbitrary and desirable disclosure of information by companies. Therefore, it can be said that investors face some type of hesitation and distrust to the honesty of provided information. The goal of this research is to test the role of trust as a behavioral motivation and the most outstanding feature of social capital on the reaction of investors against announcement of profit by emphasizing on the requirements of official institutions and information. This was examined from the viewpoint of 165 investors throughout 55 active companies of stock exchange. The results indicate that the trust level of capital market is relatively average and that trust has no effect on investors’ reaction. Moreover, the results indicate that the role of trust on investors’ reaction against announcement of profit is influenced by emphasizing on information asymmetry.

Keywords

Accounting and Auditing Research
Volume 7, Issue 26
July 2015
Pages 92-107

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