The role of social capital in price efficiency: International evidence |
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| Affiliation: | 1. College of Management, Yuan Ze University, Taoyuan City 32001, Taiwan;2. Department of Finance, National Central University, Taoyuan City 32001, Taiwan;1. College of Management and Economics, Tianjin University, Tianjin 300072, China;2. School of Economics and Finance, Massey University, New Zealand;1. Université de Montréal, Canada;2. HEC Montréal, Canada;1. School of Mathematics, Southwest Jiaotong University, Chengdu, China;2. School of Finance, Renmin University of China, Beijing, China;3. School of Finance, Nanjing University of Finance and Economics, Nanjing, China;1. Jinan University, China;2. Guangzhou University, China |
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| Abstract: | This study finds that firms with higher social capital and trust, as measured by firm environmental and social (E&S) performance, demonstrate better stock price efficiency. The result in a sample of 45 countries remains robust to alternative approaches addressing the endogeneity concerns. This relation is mainly derived from a firm's E&S engagements related to third parties and the whole of society, which regulate the firm's information environment after accounting for other influences. The positive role of E&S performance is further shaped by the firm's associated macro-level trust and social capital, as proxied by the market's cultural and institutional factors. |
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