Who Gets Believed? Trust and Investor Reaction to Earnings Announcements in Sharīʿah-Compliant vs. Sharīʿah Non-Compliant Firms

Purpose ‒ Considering the proclamations of trustworthiness within Islamic financial system and positive relationship between stock market reaction earnings announcement trustworthy firm, this paper aims to empirically test presence trust in Sharīʿah-compliant listed firms Pakistan.
 Design/Methodology/Approach The research question has been addressed by investigating on Pakistan Stock Exchange (PSX) from 1 July 2019 30 June 2020. Event study method used taking Abnormal Return Variance (ARV) Trading Volume (ATV) as proxies measure investors’ following announcements.
 Findings results suggest that price variations around announcements are negatively related compared less-trusted (i.e., Sharīʿah non-compliant firms). For ATV, it was found traders react annual for both types a similar way.
 Originality/Value This is an attempt evaluate its perspective. Sufficient literature already documented being obligatory firms. contributes examining whether market/investors such or not.
 Research Limitations/Implications based single-country analysis with span one year. Cross-country broader time horizon may give further clarity.
 Practical Implications made valuable contribution providing guideline how reactions differ their It also indicates religious elements subdue other social factors trust. explored assessing liquidity volatility Pakistan.