Trust is an essential informal system in human society, serving as the foundation for the smooth functioning of financial markets. The erosion of investor trust can impede the efficient transfer of information, leading to a decline in the accuracy and reliability of stock prices in the market. This paper employs the financial fraud filing as a shock to the trust system and finds that, although such filing event improves the quality of accounting information in the market, the resulting loss of trust causes share price synchronization among other companies in the same industry segment to increase significantly in the long run. The contagion effect is more pronounced in instances where individual investors exhibit low attention levels, demonstrate an inactive search for financial report information, exhibit a low level of internal corporate governance, and engage in low levels of investor communication. It is imperative that regulators proactively guide listed companies to communicate with investors in a two-way manner while enhancing enforcement of disclosure violations.