The role of social capital in price efficiency: International evidence

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.