Societal Trust Dynamics: Impact on Stock Market Responses to Corporate Earnings Announcements in Emerging Markets

Abstract

Investors' responses have garnered significant interest in recent years, especially in emerging economies where shifting preferences are prevalent. Investors constantly seek valuable information to make more secure investments. As therefore, while making investment choices, investors question the reliability of the information provided by companies through corporate disclosure. This study examines the impact of societal trust, as a cultural factor and behavioral trigger, on investors' perception and utilization of information provided by corporations. As therefore, while making investment choices, investors doubt the
accuracy of the information disclosed by corporate organizations. The paper utilizes event study methods to examine the average anomalous returns during the earnings announcement period in a substantial number of observations across three emerging countries: China, India, and Pakistan. The findings demonstrate a clear and meaningful correlation among trust of society trust and responses of the investor to business earnings statements. This supports the idea that societal trust plays a crucial role in shaping investors' behavior in these markets. Furthermore, the level of trust throughout society positively influences the way investors respond to company earnings statements in the emerging economies of China, Pakistan, and India.