Trust and Reciprocity with Transparency and Repeated Interactions

Posted: 11 Mar 2010

See all articles by Kiridaran (Giri) Kanagaretnam

Kiridaran (Giri) Kanagaretnam

York University - Schulich School of Business

Stuart Mestelman

McMaster University - Department of Economics

Khalid Nainar

McMaster University - Michael G. DeGroote School of Business

Mohamed Shehata

McMaster University - Michael G. DeGroote School of Business

Date Written: March 11, 2010

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 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 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.

Keywords: Transparency, Trust, Reciprocity, Repeated interaction, Business Alliances, SOX

JEL Classification: C70, C91, D63, D81, D82

Suggested Citation

Kanagaretnam, Kiridaran and Mestelman, Stuart and Nainar, S. M. Khalid and Shehata, Mohamed, Trust and Reciprocity with Transparency and Repeated Interactions (March 11, 2010). Journal of Business Research, Vol. 63, 2010, Available at SSRN: https://ssrn.com/abstract=1568870

Kiridaran Kanagaretnam (Contact Author)

York University - Schulich School of Business ( email )

4700 Keele Street
Toronto, Ontario M3J 1P3
Canada

Stuart Mestelman

McMaster University - Department of Economics ( email )

Department of Economics
Hamilton, Ontario L8S 4M4
Canada

S. M. Khalid Nainar

McMaster University - Michael G. DeGroote School of Business ( email )

1280 Main Street West
Hamilton, Ontario L8S 4M4
Canada

Mohamed Shehata

McMaster University - Michael G. DeGroote School of Business ( email )

1280 Main Street West
Hamilton, Ontario L8S 4M4
Canada
905-525-9140 (Phone)
905-521-8995 (Fax)

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