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Institutional Quality, Trust, and Stock Market Participation: Learning to Forget

Author

Listed:
  • Hossein Asgharian

    (Department of Economics, Lund University, P. O. Box 7082, S-220 07 Lund, Sweden)

  • Lu Liu

    (Stockholm Business School, Stockholm University, S-106 91 Stockholm, Sweden)

  • Frederik Lundtofte

    (Aalborg University Business School, Fibigerstræde 2, DK-9220 Aalborg Øst, Denmark4Danish Finance Institute, Solbjerg Plads 3, DK-2000 Frederiksberg, Denmark)

Abstract

In this paper, we explore the relations among institutional quality, households’ level of trust, and stock market participation. We find that institutional quality has a significant impact on both trust and participation. The individual level of trust significantly affects participation, but trust plays a small role in the effect of institutional quality on participation. Further, we demonstrate that immigrants are affected by the institutional quality of both their country of residence and their home country, and that education emerges as an important learning factor in immigrants’ adaptation to new institutional environments.

Suggested Citation

  • Hossein Asgharian & Lu Liu & Frederik Lundtofte, 2024. "Institutional Quality, Trust, and Stock Market Participation: Learning to Forget," Quarterly Journal of Finance (QJF), World Scientific Publishing Co. Pte. Ltd., vol. 14(01), pages 1-31, March.
    • Handle: RePEc:wsi:qjfxxx:v:14:y:2024:i:01:n:s2010139224500022
    DOI: 10.1142/S2010139224500022
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    More about this item

    Keywords

    Households’ stock ownership; institutional quality; trust; immigration; direct and indirect effects; learning ability;
    All these keywords.

    JEL classification:

    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance

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