Examining the effects of information sources on individual earning rates in the South Korean stock market

Abstract

Since the introduction of the Korea Stock Exchange, individual investors have been some of the most important players in the stock market. With the subsequent introduction of the Internet and online trading systems in South Korea in 1997, the participation of individual investors in the Korean stock market has greatly expanded. However, few studies have investigated their activities and earning rates. To address this research shortcoming, this study investigates the antecedents of individual investors' earning rates in the Korea stock market by employing multiple constructs of information channels and perceived usefulness. Structural equation modelling (SEM) analysis of survey data collected from 1555 individual investors reveals that the information quality of online trading systems and of companies' public announcements largely determines the individual investors' perceptions of their usefulness, whereas the information quality of two Internet channels (Internet news and other web pages) only moderately affects perceived usefulness. Additionally, the information quality of two TV channels significantly affects perceived usefulness, but the effects are weaker than for the other channels. In addition, our findings confirm a close relationship between the perceived usefulness of information and individual investors' earning rates. Last, we discuss the implications and present suggestions for future research.