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Social capital and retail investor behavior: evidence from the corporate social irresponsibility shocks in Taiwan

Author

Listed:
  • Bui, Dien Giau
  • Chen, Ting-Hsuan
  • Hasan, Iftekhar
  • Lin, Chih-Yung

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.

Suggested Citation

  • Bui, Dien Giau & Chen, Ting-Hsuan & Hasan, Iftekhar & Lin, Chih-Yung, 2026. "Social capital and retail investor behavior: evidence from the corporate social irresponsibility shocks in Taiwan," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 108(C).
    • Handle: RePEc:eee:intfin:v:108:y:2026:i:c:s1042443126000193
    DOI: 10.1016/j.intfin.2026.102303
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    Keywords

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    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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