The Role of Social Trust in Investor's Reaction to Earning Announcement and the Impact of Earning Quality and Delay in Reporing on their Relation

In the financial markets, the information can be reported as signs, symptoms, news and various prediction from inside or outside of the company in order to be available for shareholders and stimulus their reaction. There are many factors which affect the investors reaction to information disclosed. Whereas, the characteristics of companies are different, it seems to increase the efficiency of capital markets is a necessity by focusing on the factors which stimulate investors to react. So the aim of this study is to examine the role of social trust as a behavioral stimulus and the most striking feature of social capital that is one of the most important aspects of psychology and human on the investor’s reaction to earning announcement and the impact of earning quality and delay in reporting on their relation. It was investigated by 210 professional investors at 70 active companies in stock exchange. The results of study indicate that the level of social trust in the capital market is relatively moderate and the trust itself has no effect on the investor’s reaction. Then the study is tested by the impact of two variables earning quality and delay in reporting on the relation between trust and investors reaction. Moreover, the results of testing research hypotheses show that this relation is affected by earning quality and delay in reporting.