The Philosophy of Trust

Would you wish that people would trust you more? That people would find you more believable? but how do you gain these confidences? How do you garner confidence from those around you?

Well, there is a theory for it  – source credibility theory. My research explores this theory and examines its effects in influencing the perceived credibility of corporate financial reporting information.

The effect of source credibility has been widely examined in communication, political and psychological science research, but there is little evidence to support the persuasive role in a setting as complex and opaque as corporate financial reporting information.

Source credibility theory is originally coined by the ancient Greek philosopher, Aristotle. He theorises that for a speech to be persuasive, the speaker has to have the application of these three following attributes: (1) Ethos (ethics or good character), (2) Logos (logic), and (3) Pathos (emotion).

According to Aristotle, the more speaker is perceived as of having good character, the abilities to demonstrate logical reasoning and incorporating a degree of emotional context in their arguments, the more likely for them to achieve communication effectively.

Out of these three attributes, interestingly, Aristotle places a high emphasis on Ethos, the appeal of the good character. In his work of Rhetoric, Aristotle posits:

“We believe good men more fully and more readily than others: this is true generally whatever the question is, and absolutely true where exact certainty is impossible and opinions are divided.” – Aristotle, 1954

Aristotle argues that good character is not only useful in inspiring believability, but also effective in reducing noise arising from information uncertainty and mixed opinions. 

The Aristotelian theory of source credibility has since inspired many subsequent scholars from various disciplines to investigate the effects of source credibility in facilitating decision makings. In modern literature, however, source credibility is rather identified as a combined effect of perceived: (1) expertness (competency) and (2) trustworthiness.

Most prior research tends to examine the impact of source credibility – expertise since it is easier to measure. For example, the source’s expertness can be measured by using the rate of experience, or the level of skills or education.

The second component – trustworthiness, has been argued to be more difficult for researchers to measure due to its elusive nature. Some studies even refer to trustworthiness as a form of bias. However, findings from prior social science and negotiation research suggest that trustworthiness does involve certain degrees of assessment of the expectation of loss. Furthermore, a study by McGinnis and Ward found evidence that suggests trustworthiness can carry greater weight than expertness in the assessment of source credibility.

But how can you build trustworthiness? Research has shown that trustworthiness can be built by the first obvious reason i.e. accumulating trust. Trust is defined as the expectations that one’s weaknesses will not be exploited by whom the trust is first entrusted upon. Contrary to the traditional view that argued trust is a biased decision, it actually involves calculation of risk of misplaced trust.

The social science literature identifies that trust involves: (1) assessment of reciprocal exchange, where two parties benefit each other from their interactions or relationships, and (2) judgment of responsibility, in which it should inform about one’s ethics. This relates back to Aristotle’s original proposition that ethic is central to building source credibility.

The factor – reciprocity, has the ability to build a good reputation of the source by the perception of being fair, compassionate and of selfless character. This can reduce the expectation of loss associated with greed or an opportunist character. In business, opportunism is the most known issue of corruption that often cost the shareholders of their investments.

The judgment of responsibility factor affects trust by helping to predict the source’s reliability in the future to complete the work as entrusted. The more you characterise as being responsible, the lower the risk of the assumption that you will go rogue such as, backing off from the work as agreed in the contract, or refuse to reimburse the loss party due to the failure to deliver work or profits as promised.  

In summary, to have trust, or be perceived as a trustworthy person, you must first demonstrate that you are increasing the benefits of those whom you are in a relationship with, be it your spouse, family members, friends, neighbours, colleagues or employees. Second, you must be able to demonstrate that you are also a responsible character. As explained previously, this helps in reducing the risk perception that you are more likely to cause future harm.

So, in turn, I ask this question, would you blindly trust someone especially financially with character signatures of being only self-benefiting and, or show the lack of responsibility after this?

In future, I might share more of my research, including the findings that shall answer among others; which information available in financial reporting that is useful to measure source’s trustworthiness and most importantly, whether source credibility effects extend to the financial reporting information.

Reference list

Bamber, E. (1983). Expert Judgment in the Audit Team: A Source Reliability Approach. Journal Of Accounting Research, 21(2), 396-412. doi: 10.2307/2490781.

Berglund, N., & Kang, T. (2013). Does Social Trust Matter in Financial Reporting?: Evidence from Audit Pricing. Journal Of Accounting Research, 12, 119-121. Retrieved from https://www.uts.edu.au/sites/default/files/ACCconf14TKang.pdf

Creed, W., & Miles, R. (1996). Trust in organizations: A conceptual framework. In R. Kramer & T. Tyler, Trust in organizations (pp. 16-38). Thousand Oaks, CA: Sage.

Earle, T., & Cvetkovich, G. (1995). Social trust: Toward a cosmopolitan society. Westport, Conn.: Greenwood Publishing Group.

Hovland, C., & Weiss, W. (1951). The Influence of Source Credibility on Communication Effectiveness. Public Opinion Quarterly, 15(4), 635-650. doi: 10.1086/266350.

Kramer, R., & Tyler, T. (1996). Trust in organizations. Thousand Oaks, CA: Sage.

McGinnies, E., & Ward, C. (1974). Persuasibility as a function of source credibility and locus of control: Five cross cultural experiments. Journal Of Personality, 42(3), 360-371. doi: 10.1111/j.1467-6494.1974.tb00680.x.

Mercer, M. (2004). How Do Investors Assess the Credibility of Management Disclosures?. Accounting Horizons, 18(3), 185-196. doi: 10.2308/acch.2004.18.3.185.

Pornpitakpan, C. (2004). The Persuasiveness of Source Credibility: A Critical Review of Five Decades’ Evidence. Journal Of Applied Social Psychology, 34(2), 243-281. doi: 10.1111/j.1559-1816.2004.tb02547.x

Rhetoric by Aristotle Translated by W. Rhys Roberts. (1954). Retrieved from http://classics.mit.edu/Aristotle/rhetoric.1.i.html