Social Capital and Retail Investor Behavior: Evidence From the Corporate Social Irresponsibility Shocks in Taiwan
Dien Giau Bui, Ting-Hsuan Chen, Iftekhar Hasan, Chih-Yung Lin
Journal of International Financial Markets, Institutions and Money,
Vol. 108 (April),
2026
Abstract
In this paper, we use granular trading data from Taiwan between 2012 and 2016 to examine how local social capital influences retail investor behavior during corporate social irresponsibility (CSIR) events. Therefore, we are responding to longstanding calls in the international finance literature to explore investor behavior in non-US markets with distinct institutional and cultural characteristics. We find that investors residing in cities with higher social capital are less likely to purchase underpriced stocks following the announcements of negative events despite the potential for positive abnormal returns. This norm-driven restraint reflects a form of socially responsible investing motivated by community-based values rather than economic rationality. By documenting this behavior in an East Asian market, we extend the external validity of social norm theories developed in Western settings and contribute to a more nuanced understanding of how localized social preferences can influence asset pricing and capital allocation in a global context.
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Political Polarization and Finance
Elisabeth Kempf, Margarita Tsoutsoura
Annual Review of Financial Economics,
Vol. 16 (November),
2024
Abstract
We review an empirical literature that studies how political polarization affects financial decisions. We first discuss the degree of partisan segregation in finance and corporate America, the mechanisms through which partisanship may influence financial decisions, and the available data sources used to infer individuals’ partisan leanings. We then describe and discuss the empirical evidence. Our review suggests an economically large and often growing partisan gap in the financial decisions of households, corporate executives, and financial intermediaries. Partisan alignment between individuals explains team and financial relationship formation, with initial evidence suggesting that high levels of partisan homogeneity may be associated with economic costs. We conclude by proposing several promising directions for future research.
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