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Trust and reciprocity with transparency and repeated interactions

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  • Kanagaretnam, Kiridaran
  • Mestelman, Stuart
  • Nainar, S.M. Khalid
  • Shehata, Mohamed

Abstract

This paper uses data from a controlled laboratory environment to study the impact of transparency (i.e., complete information versus incomplete information) and repeated interactions on the level of trust and trustworthiness (reciprocity) in an investment game setting. The key findings of the study are that transparency (complete information) significantly increases trusting behavior in one-shot interactions. This result persists in repeated interactions. Further, transparency appears important for trustworthiness in one-shot interactions. In addition, repeated interaction increases trust and reciprocity with or without transparency. These results suggest that transparency is important in building trust in business environments such as alliances and joint ventures which are loosely connected organizational forms that bring together otherwise independent firms. It also provides support for the Sarbanes-Oxley Act of 2002 (SOX) and similar legislation elsewhere which attempt to regain investors' trust in corporate management and financial markets by stipulating enhanced disclosures.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Business Research.

Volume (Year): 63 (2010)
Issue (Month): 3 (March)
Pages: 241-247

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Handle: RePEc:eee:jbrese:v:63:y:2010:i:3:p:241-247

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Web page: http://www.elsevier.com/locate/jbusres

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Keywords: Transparency Trust Reciprocity Repeated interaction Business alliances SOX;

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Cited by:
  1. Kiridaran Kanagaretnam & Stuart Mestelman & Khalid Nainar & Mohamed Shehata, 2009. "The Impact of Empowering Investors on Trust and Trustworthiness," Department of Economics Working Papers 2009-16, McMaster University.

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