Exploitation Of Trust Research Articles

Locality Stereotype, CEO Trustworthiness and Stock Price Crash Risk: Evidence from China

Exploring the locality stereotype with respect to CEO’s trustworthiness, we find that firms whose CEOs are from more reputable hometowns have a higher likelihood of stock price crashes, indicating the presence of a CEO “Trust Exploitation” effect, i.e. a high-trust identity does not guarantee managerial ethics; to the contrary, it could tempt CEOs to abuse outsiders’ trust, camouflage their misconducts and conceal adverse information more severely. The effect of CEO’s perceived trustworthiness on tail risk of stock price remains robust when controlling for the region-level trust of firm’s headquarters, and in 2SLS regression with an instrumental variable. Further, CEO’s “Trust Exploitation” effect is more prominent among firms with lower disclosure quality, higher capital market pressure and higher CEO incentives. Our findings highlight an unexplored imperfection of individual-level trustworthiness as a reliable substitute for formal monitoring devices in terms of improving stock market stability.

Direct trust assignment using social reputation and aging

The exploitation of trust in virtual environments, on-line services, intelligent pervasive environments and many other scenarios still deserve researchers’ interest. In this work we investigate on how to assess the local (direct) trust a node receives from each of his neighbors. Our proposal is social-based and takes into account both positive and negative experiences as well as the history of past feedbacks and their aging, ensuring good stability also when a node receives hundreds of positive feedbacks briefly followed by few negative feedbacks. Our results are illustrated by performing several simulations on different networks.