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. (shrink)

We examine the impact of a city’s cultural diversity on a firm’s tax avoidance. Our findings suggest that when a firm is located in a culturally diverse city, it exhibits less TA than a firm located in a less culturally diverse city. The findings are robust to alternative metrics of cultural diversity and TA and after accounting for omitted sample bias and endogeneity. Additional analysis suggests that the negative impact of cultural diversity on a firm’s TA is more salient in (...) a firm with strong managerial incentives or in a city that is characterized by more migration. Furthermore, we document that the negative impact of cultural diversity on TA is more pronounced when firms face strong financial constraints or effective internal and external monitoring. (shrink)

Senior executives in major corporations have drawn attention in recent years for a range of unethical activities. Despite a rise in measures to protect against such lapses, executives still make decisions whether or not to comply with reporting standards, best practices, industry norms and legislation. The prior literature in this area addresses individual characteristics of decision makers and social networks between executives and boards of directors, but to this point has largely overlooked group dynamics of the executive team. Our study (...) addresses this gap and examines the relationship between an occupational community of top executives and the quality of internal control. We construct a unique measure for the executive occupational community based on CEO and CFO’s joint tenure. Our findings show that the number of years of CEO/cfo’s joint tenure is significantly and negatively associated with internal control weakness, suggesting that the longer the executive relationship, the lower the likelihood of internal control weakness. Our study indicates that the presence of an occupational community contributes to better internal control. (shrink)