Intentions behind disclosure to promote trust under short-termism: An experimental study

We experimentally examine the impact of varying intentions behind information disclosures on trust and reciprocity between an investor and a manager during short-term transactions where reputations cannot be established. To do so, we use a trust game with asymmetric information and conduct lab experiments, comparing one unintentional disclosure condition and two intentional disclosure conditions. The results reveal that information disclosure promotes investments and returns under all three conditions, even in short-term transactions. Further, compared with unintentional disclosure, intentional disclosure fosters greater trust and reciprocity between managers and investors. We also suggest that mutual trust can be developed even before reputation and a long-term relationship are formed. Our study sheds light on the merits of intentional disclosures from a short-term perspective and in particular, the practical importance of institutional design for investors to acquire information.