Journal articles: 'Nonprofessional investors'

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Frederickson, James R., and Jeffrey S. Miller. "The Effects of Pro Forma Earnings Disclosures on Analysts' and Nonprofessional Investors' Equity Valuation Judgments." Accounting Review 79, no. 3 (July 1, 2004): 667–86. http://dx.doi.org/10.2308/accr.2004.79.3.667.

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This paper presents an experiment that examines the effect of pro forma earnings disclosures on the judgments of analysts (i.e., more sophisticated investors) and nonprofessional (i.e., less sophisticated) investors. In the experiment, participants developed stock price assessments after reviewing background financial information and a current earnings announcement for a company. The earnings announcement was manipulated to report only GAAP earnings in one condition and both pro forma and GAAP earnings in the other condition. Consistent with empirical evidence, the pro forma earnings in our experiment exceeded GAAP earnings. The results indicate that nonprofessional investors who received an earnings announcement that contained both pro forma and GAAP disclosures assessed a higher stock price than did nonprofessionals who received an announcement containing only GAAP disclosures. Financial analysts' stock price judgments were not affected by the pro forma disclosures. Followup analyses suggest that analysts and nonprofessional investors used different valuation models and information processing. Analysts used well-defined valuation models, based on either earnings-multiples or cash flows, while the nonprofessional investors were more likely to use simpler, heuristic-based valuation models. The pro forma disclosure did not cause nonprofessional investors to assess a higher earnings number for determining a stock price, but rather caused nonprofessionals to perceive the earnings announcement as more favorable, which in turn caused them to convert earnings or some other performance metric into a higher stock price. This effect appears to be due to unintentional cognitive effects, rather than nonprofessionals relying on pro forma earnings information because they perceived it to be informative.

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Cohen, Jeffrey R., Lori Holder-Webb, and Valentina L. Zamora. "Nonfinancial Information Preferences of Professional Investors." Behavioral Research in Accounting 27, no. 2 (June 1, 2015): 127–53. http://dx.doi.org/10.2308/bria-51185.

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ABSTRACT Academics, regulators, and the general business community have called for the assessment of the decision-usefulness of three key categories of nonfinancial information: economic, governance, and corporate social responsibility (CSR). This study builds on prior research by examining the nonfinancial information preferences of professional investors, how their demand for the nonfinancial information categories compares to those of nonprofessional investors, and whether these demands vary across subgroups of professional investors. Based on survey responses from 228 professional investors, the results show that this investor class prefers nonfinancial information that is concise, comprehensive, comparable, and credible. Similar to prior research, the results indicate that professional and nonprofessional investors have similar demand orderings: they are most interested in economic information, then governance information, and then CSR information. However, professional investors demand greater detail than do nonprofessional investors for subcategories of economic and governance information. Further, while both professional and nonprofessional investors' demand is increasing for all subcategories of governance and CSR information, the change in demand is more pronounced for nonprofessional relative to professional investors, and particularly for CSR information subcategories. These variations in preferences suggest potential differences in perspectives between professional and nonprofessional investors. Finally, the findings indicate that institutional investors have recently used less economic information. For the subgroups whose investment research consists of at least a quarter of socially responsible investments (SRI), the higher the SRI investor level, the higher the recent usage of more information categories; and the higher the SRI investor level, the higher the future demand for economic information, but the lower the SRI investor level, and the higher the demand for CSR information. These findings suggest potential differences in investment approaches among subgroups of professional investors. Together, these results provide support for more integrated reporting of nonfinancial information to meet professional investors' multidimensional preferences and differences in demand relative to those of nonprofessional investors.

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Bailey, Wendy J., and Kimberly M. Sawers. "In GAAP We Trust: Examining How Trust Influences Nonprofessional Investor Decisions Under Rules-Based and Principles-Based Standards." Behavioral Research in Accounting 24, no. 1 (December 1, 2011): 25–46. http://dx.doi.org/10.2308/bria-50071.

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ABSTRACT In this study, we investigate whether and how trust in our current, more rules-based financial reporting system and type of accounting standard affects nonprofessional investor decision making. In an experiment, 151 nonprofessional investors analyzed two companies that were economically identical except for a single underlying financial reporting difference that allowed one company to more positively report its financial results. By itself, the type of standard (rules-based, principles-based) did not affect investment choices or allocation decisions. However, when trust was considered, nonprofessional investors who are less trusting of our current financial reporting system chose to invest in a company with more positive financial results only when evaluating principles-based financial statements. Conversely, the type of standard did not affect investor decision making for nonprofessional investors who trust our current financial reporting system. These results have implications for standard setters as we move to a more principles-based accounting system. Data Availability: Available on request.

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Kipp, Peter C., Yibo (James) Zhang, and Amanuel F. Tadesse. "Can Social Media Interaction and Message Features Influence Nonprofessional Investors' Perceptions of Firms?" Journal of Information Systems 33, no. 2 (February 1, 2018): 77–98. http://dx.doi.org/10.2308/isys-52067.

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ABSTRACT We investigate the impact of social media messages on nonprofessional investors' assessments of management credibility and firm value. In a between-participants experiment, we examine the joint effect of social media message vividness, valence, and micro-blogger influence on nonprofessional investors' assessments of management credibility and firm value. We find that when social media messages are pallid and negative (positive), high micro-blogger influence decreases (increases) nonprofessional investors' assessments of management credibility. In contrast, the effect is absent when messages are vivid. Further, we find that the effect of micro-blogger influence on nonprofessional investors' assessments of blogger credibility and management credibility is mediated by social media interactions. The assessment of management credibility, in turn, significantly impacts nonprofessional investors' firm valuation assessment. The results have implications for regulators (SEC 2013) that may wish to update their guidance to managers on how to monitor or even control nonprofessional investors' interaction on social media platforms. Data Availability: Contact the authors.

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Dilla, William, Diane Janvrin, Jon Perkins, and Robyn Raschke. "Investor views, investment screen use, and socially responsible investment behavior." Sustainability Accounting, Management and Policy Journal 7, no. 2 (May 3, 2016): 246–67. http://dx.doi.org/10.1108/sampj-07-2015-0066.

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Purpose Despite the increasing demand for socially responsible investments (SRIs) and the importance of information intermediaries in providing corporate social responsibility (CSR) performance information through SRI screens, relatively little is known about the relationship between nonprofessional investors’ views regarding SRI, their use of SRI screens and their actual SRI behavior. This study aims to distinguish between investor views about the importance of corporate environmental responsibility (environmental performance importance views) and whether they view environmentally responsible firms as yielding higher returns (environmental performance return views). It examines the association between these views, SRI screen use and reported SRI holdings. Design/methodology/approach Nonprofessional investor participants completed an online survey about their SRI investment views, screen use and investment behavior. The survey yielded 201 usable responses. Findings The strength of participants’ environmental performance importance and environmental performance return views is positively associated with their use of SRI screens and the proportion of their portfolios held in SRIs. SRI screen use only partially mediates the association between investors’ environmental performance importance and return views and their SRI holdings. Research limitations/implications The study does not precisely address what types of SRI screens nonprofessional investors may be using. It does not control for investors’ specific experience with SRIs, nor does it examine how or why investors come to believe that environmental responsibility may improve a company’s return potential. Practical implications The fact that SRI screen use only partially mediates the association between investors’ views and their SRI holdings suggests that either reliable, unfiltered CSR information is important for nonprofessional investors or some investors are choosing SRIs without obtaining adequate relevant information. Social implications The study’s findings confirm earlier research findings which show an association between investors’ pro-environmental views and their decision to invest in SRIs (Williams, 2007; Nilsson, 2008) and suggest that nonprofessional investors are becoming aware of the positive relation between environmental performance and firm value (Dhaliwal et al., 2011; Clarkson et al., 2013; Hawn et al., 2014; Matsumura et al., 2014). Originality/value This study simultaneously examines the influence of environmental performance importance (an “alternative” investment perspective) and environmental performance return (a “traditional” investment perspective) on investors’ SRI behavior.

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Elliott, W. Brooke, Frank D. Hodge, Jane Jollineau Kennedy, and Maarten Pronk. "Are M.B.A. Students a Good Proxy for Nonprofessional Investors?" Accounting Review 82, no. 1 (January 1, 2007): 139–68. http://dx.doi.org/10.2308/accr.2007.82.1.139.

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We investigate a key assumption underlying much of the experimental research in financial accounting that graduate business students are a good proxy for nonprofessional investors. To conduct our investigation, we categorize recent experimental studies in financial accounting, based on the relative level of integrative complexity inherent in each study's task. We then conduct experiments using two tasks, one that is relatively low in integrative complexity and one that is relatively high in integrative complexity, and compare the responses of two groups of M.B.A. students and nonprofessional investors. Our results suggest that using M.B.A. students as a proxy for nonprofessional investors is a valid methodological choice, provided researchers give careful consideration to aligning a task's integrative complexity with the appropriate level of M.B.A. student. M.B.A. students who have completed their core M.B.A. courses and are enrolled in or have completed a financial statement analysis course are a good proxy for nonprofessional investors in tasks that are relatively low in integrative complexity. Though less definitive, the majority of our tests also suggest that these students are a good proxy for nonprofessional investors in tasks that are relatively high in integrative complexity. However, care must be taken when using students in the first-year core financial accounting course. In tasks that are relatively low in integrative complexity, these students perform similarly to nonprofessional investors except when they are asked to make an investment decision. In tasks that are relatively high in integrative complexity, these students acquire information similarly to nonprofessional investors, but they do not appear to integrate the information in a similar manner.

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Rose, Jacob M., Carolyn Strand Norman, and Anna M. Rose. "Perceptions of Investment Risk Associated with Material Control Weakness Pervasiveness and Disclosure Detail." Accounting Review 85, no. 5 (September 1, 2010): 1787–807. http://dx.doi.org/10.2308/accr.2010.85.5.1787.

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ABSTRACT: This research examines whether investors adjust their assessments of investment risk in response to material control weakness disclosures, the pervasiveness of material control weaknesses, and the detail of explanation provided regarding the pervasiveness of material control weaknesses. Findings from a laboratory experiment with 97 nonprofessional investors, a second experiment with 53 nonprofessional investors, and surveys of 47 investors and 28 Fortune 500 directors confirm prior archival findings that investors adjust their investment risk assessments in response to material weakness disclosures. More importantly, we find evidence of an interactive effect of material control weakness pervasiveness and disclosure detail that is counter to the expected benefits of expanded disclosure desired by corporate directors. When material weakness disclosures include specific and detailed discussion of the pervasiveness of control weaknesses, investors increase assessments of investment risk for less pervasive weaknesses and decrease assessments of risk for more pervasive weaknesses. Results indicate that these findings are driven by different levels of investor trust in management.

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Owens, Joel, and Erin M. Hawkins. "Using Online Labor Market Participants for Nonprofessional Investor Research: A Comparison of MTurk and Qualtrics Samples." Journal of Information Systems 33, no. 1 (February 1, 2018): 113–28. http://dx.doi.org/10.2308/isys-52036.

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ABSTRACT Recently, researchers have begun using online labor markets to recruit participants for experimental studies examining the judgments and decisions of nonprofessional investors. This study investigates the quality and generalizability of data collected from these sources by replicating an experimental task from Elliott, Hodge, Kennedy, and Pronk (2007) using nonprofessional investor participants from two popular online labor markets—Amazon's Mechanical Turk (MTurk) and Qualtrics Online Sample (Qualtrics). Compared to Qualtrics participants, we find that MTurk participants pay greater attention to the experimental materials and better acquire and recall information. Further, the MTurk sample more closely replicates EHKP's investment club member results on measures of information integration than does the Qualtrics sample. These results provide some evidence that many interesting research questions can be satisfactorily answered using nonprofessional investor participants from MTurk. We believe further investigation is needed before Qualtrics can be endorsed as a high-quality source of nonprofessional investor participants.

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Zhang, James (Yibo). "The Impact of Vivid Graphical Presentation of Financial Information in Digital Annual Reports on Investors' Impressions of Management and Firm Performance." Journal of Information Systems 34, no. 3 (August 5, 2019): 233–53. http://dx.doi.org/10.2308/isys-52533.

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ABSTRACT This study examines the effect of graphical vividness on nonprofessional investors' impressions of management and firm performance when the financial performance news is either positive or negative. Conducting a 2 × 2 between-participants experiment with 470 participants from Amazon Mechanical Turk (M-Turk), I find that when the news is positive, nonprofessional investors have more positive impressions of management, which, in turn, leads to more positive impressions of firm performance when the graphical presentation is vivid versus pallid. In contrast, when the news is negative, presenting graphs vividly has little effect on nonprofessional investors' impressions. The study contributes to regulators and practice by demonstrating that allowing a high degree of presentation flexibility in digital annual reports has behavioral outcomes to nonprofessional investors' judgments and decisions. The study also contributes to the strategic disclosure literature by demonstrating the impact of graphical vividness in presenting financial performance information.

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Janvrin, Diane J., Robert E. Pinsker, and Maureen Francis Mascha. "XBRL-Enabled, Spreadsheet, or PDF? Factors Influencing Exclusive User Choice of Reporting Technology." Journal of Information Systems 27, no. 2 (July 1, 2013): 35–49. http://dx.doi.org/10.2308/isys-50569.

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ABSTRACT U.S. adoption of eXtensible Business Reporting Language (XBRL)-enabled technology has been slow. Prior experimental evidence suggests that even when XBRL-enabled technology is available, almost 50 percent of participants do not use it. This study informs AIS researchers on the state of XBRL-enabled technology by using an exclusive choice experimental design to examine (1) which reporting technology nonprofessional investors will choose to complete a financial analysis task (XBRL-enabled, portable document file, or spreadsheet), and (2) why they choose the specific technology. Findings indicate that 66 percent of nonprofessional investors chose XBRL-enabled technology, while 34 percent chose spreadsheets. Participants who chose the former perceived that it reduces the time to complete the task (i.e., increases task efficiency), while participants who chose the latter indicated their choice was driven by prior technology experience. Study results have implications for the Securities and Exchange Commission (SEC), researchers examining nonprofessional investor behavior, user choice literature, and XBRL-enabled technology adoption.

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Cheng, Xu (Joyce), and Stephanie Walton. "Do Nonprofessional Investors Care About How and When Data Breaches are Disclosed?" Journal of Information Systems 33, no. 3 (March 1, 2019): 163–82. http://dx.doi.org/10.2308/isys-52410.

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ABSTRACT While prior research suggests that the market responds negatively to data breach disclosures, how nonprofessional investors assess factors surrounding these disclosures has only been assessed anecdotally. We examine whether investor judgments are influenced by whether a breached company is the first to disclose a data breach and whether a significant amount of time has lapsed between the breach and disclosure. We find evidence that investors respond to a company originating disclosure with lower investment judgments than if disclosure comes from an external source, without consistent regard to the timing of disclosure. We also find that investors make the least favorable investment judgments when the breached company initiates the data breach disclosure and when there is a significant delay between the data breach and initial public disclosure. Our study provides a greater understanding of one consequence of data breaches, that is, how timing and disclosure initiative influence nonprofessional investors' judgments. JEL Classifications: G41; M41.

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Asay, H. Scott, and Jeffrey Hales. "Disclaiming the Future: Investigating the Impact of Cautionary Disclaimers on Investor Judgments Before and After Experiencing Economic Loss." Accounting Review 93, no. 4 (October 1, 2017): 81–99. http://dx.doi.org/10.2308/accr-51924.

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ABSTRACT We examine how cautionary disclaimers about forward-looking statements affect investor judgments both before making an investment and after having suffered an investment loss. In our first experiment, a cautionary disclaimer appears to effectively communicate to nonprofessional investors that forward-looking statements may not be reliable, but we find little evidence that the disclaimer alters the extent to which forward-looking statements influence nonprofessional investors' valuation judgments. In our second experiment, we shift our focus to ex post judgments and find that the disclaimer influences the extent to which investors feel wronged and entitled to compensation after an investment loss, consistent with investors attending to the disclaimer and acting as if it were, ex ante, effective. Notably, investors continue to feel more wronged and entitled to financial compensation when available evidence suggests that management knowingly issued false or misleading forward-looking statements—even if disclaimed. Together, these results provide support for recent judicial efforts to erode the sweeping safe harbor provisions currently granted to companies. Data Availability: Contact the authors.

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Pitre, Terence J. "Effects of Increased Reporting Frequency on Nonprofessional Investors' Earnings Predictions." Behavioral Research in Accounting 24, no. 1 (December 1, 2011): 91–107. http://dx.doi.org/10.2308/bria-50039.

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ABSTRACT More frequent financial reporting has been a topic of debate for many years. However, little evidence exists about the possible effects of more frequent reporting on investors' decision making. Using a between-subjects experiment, this study analyzes how altering the timing or frequency of earnings reports—weekly, as opposed to quarterly, reports—affects the accuracy and dispersion of earnings predictions by nonprofessional investors. This is important, since regulators have identified nonprofessionals as a significant audience for financial reports. I hypothesize and find that more frequent reporting results in less accurate predictions and greater variance, particularly when a strong seasonal pattern exists. Finally, investors in the more-frequent reporting condition self-reported that they were more influenced by older historical data—suggesting primacy effects—while those in the less-frequent reporting condition self-reported that they were more influenced by the newer historical data, suggesting recency effects. Data Availability: Data are available from the author on request.

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Elliott, W. Brooke. "Are Investors Influenced by Pro Forma Emphasis and Reconciliations in Earnings Announcements?" Accounting Review 81, no. 1 (January 1, 2006): 113–33. http://dx.doi.org/10.2308/accr.2006.81.1.113.

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This study presents the results of an experiment that examines how two underlying characteristics of pro forma earnings announcements, pro forma emphasis and the presence of a quantitative reconciliation, influence nonprofessional investors' and analysts' reliance on pro forma disclosures. The results indicate that the emphasis management places on pro forma earnings, not the mere presence of pro forma earnings, influences nonprofessional investors' judgments and decisions, but that this influence is mitigated by the presence of a quantitative reconciliation. Further analysis reveals that the influence of pro forma emphasis on nonprofessional investors' judgments and decisions seems to be the result of an unintentional cognitive effect as opposed to the perceived informativeness of the earnings figure emphasized by management. Analysts' judgments and decisions were also affected by the presence of reconciliation, but in the opposite direction to those of nonprofessional investors. Specifically, the presence of a quantitative reconciliation led analysts to view pro forma earnings as more reliable, increasing their reliance on the pro forma disclosure in judging the earnings performance of the firm.

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Daigle, Ronald J., Robert E. Pinsker, and Terence J. Pitre. "The Impact of Order Effects on Nonprofessional Investors' Belief Revision When Presented a Long Series of Disclosures in an Experimental Market Setting." Accounting Horizons 29, no. 2 (December 1, 2014): 313–26. http://dx.doi.org/10.2308/acch-50997.

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SYNOPSIS Because firms are likely to release both good and bad news in close proximity to each other, it is important to understand what impact a long information set of mixed directional (i.e., both good and bad news) disclosures has on nonprofessional investors' stock price valuation decisions. Previous experimental research has identified information order effects as a critical factor impacting the decisions made by nonprofessional investors. However, the efficient market hypothesis predicts that individual biases are eliminated by the presence of market incentives, an element that is missing in prior studies on the effects of long information sets disclosures. Consequently, this study seeks to understand if and how order effects prevail in a market setting that includes economic incentives. Our findings indicate that initial primacy effects revert to recency effects over time. These results offer insights regarding how nonprofessional investors process mixed information disclosures over time and should be of interest to firm managers and investors, since firms that release information to investors want to know what effects, if any, information order/disclosure patterns have on investors' long-term firm valuations. Data Availability: Data are available from the first author upon request.

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Maines, Laureen A., and Linda S. McDaniel. "Effects of Comprehensive-Income Characteristics on Nonprofessional Investors' Judgments: The Role of Financial-Statement Presentation Format." Accounting Review 75, no. 2 (April 1, 2000): 179–207. http://dx.doi.org/10.2308/accr.2000.75.2.179.

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Statement of Financial Accounting Standards (SFAS) No. 130 requires companies to report comprehensive income in a primary financial statement, but allows its presentation in either a statement of comprehensive income or a statement of stockholders' equity (Financial Accounting Standards Board [FASB] 1997). In an experiment, we examine whether and how alternative presentation formats affect nonprofessional investors' processing of comprehensive-income information, specifically, information disclosing the volatility of unrealized gains on available-for-sale marketable securities. The results show that nonprofessional investors' judgments of corporate and management performance reflect the volatility of comprehensive income only when it is presented in a statement of comprehensive income. We provide evidence consistent with our psychology-based framework that these findings occur because format affects how nonprofessional investors weight comprehensive-income information and not whether they acquire this information or how they evaluate it.

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Bedard, Jean C., Steve G. Sutton, Vicky Arnold, and Jillian R. Phillips. "Another Piece of the “Expectations Gap”: What Do Investors Know About Auditor Involvement with Information in the Annual Report?" Current Issues in Auditing 6, no. 1 (January 1, 2012): A17—A30. http://dx.doi.org/10.2308/ciia-50120.

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SUMMARY The “expectations gap” refers to differences in views of auditors and users regarding the extent of assurance obtained from auditing procedures. One aspect of the expectations gap considered by prior research is whether users differentiate the level of assurance provided by different audit procedures. We extend that research by studying whether investors understand that information outside of the financial statements, in the 10-K as well as on corporate websites, is not audited. This research is important, as the Public Companies Accounting Oversight Board currently is considering proposals aimed at clarifying or expanding the auditor's responsibility for that information. We surveyed professional and nonprofessional investors, and find that professionals are more likely than nonprofessionals to correctly identify which 10-K components are audited. However, many investors in both groups believe that information outside of the financial statements is audited when in fact it is not. We also find some evidence that investors use certain information categories more often when they believe that the information is audited. Also, for both investor groups, responses concerning whether currently unaudited information categories should be audited suggest an unmet demand for greater assurance on information outside of the financial statements. Our results support proposals for greater clarity in the audit opinion concerning the nature of procedures performed on information outside of the financial statements. Further, our findings imply that additional assurance on that information might be considered useful.

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Koonce, Lisa, Michael G. Williamson, and Jennifer Winchel. "Consensus Information and Nonprofessional Investors’ Reaction to the Revelation of Estimate Inaccuracies." Accounting Review 85, no. 3 (May 1, 2010): 979–1000. http://dx.doi.org/10.2308/accr.2010.85.3.979.

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ABSTRACT: To curb opportunism in financial reporting, researchers and regulators have proposed that firms be required to report reconciliations of prior year estimates. We provide experimental evidence that such disclosures are not sufficient for nonprofessional investors to identify firms that are opportunistic in their estimates. We also offer evidence suggesting that the value of these disclosures can be enhanced when nonprofessional investors seek out information about the estimate accuracy of other firms in the industry (i.e., consensus information). Our study provides insights about these disclosures and the mechanisms that enhance their effectiveness. Our findings have broad implications for standard-setters and future research designed to assist in identifying opportunistic management behavior.

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Pinsker, Robert. "Long Series of Information and Nonprofessional Investors' Belief Revision." Behavioral Research in Accounting 19, no. 1 (January 1, 2007): 197–214. http://dx.doi.org/10.2308/bria.2007.19.1.197.

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This paper reports the results of an experiment designed to examine the effect of disclosure pattern (sequential versus simultaneous) and direction of information (positive/negative versus negative/positive) on nonprofessional investors' belief revisions. An important feature of the experiment is that long series of information are used. Prior research has largely examined individuals' belief revisions using short series of information. Results indicate that individuals revise beliefs to a larger extent when the disclosure pattern is sequential rather than simultaneous. The findings extend the prior belief revision literature by providing evidence that results hold using long series of information: the current experiment uses 20 pieces of information, whereas most accounting studies only use four pieces of information. Results also contribute to the extant financial accounting literature on nonprofessional investors that is particularly relevant given the larger number of inexperienced investors entering the marketplace and recent legislation that requires more detailed firm disclosures (e.g., the Sarbanes-Oxley Act [SOX] of 2002).

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Lude, Maximilian, and Reinhard Prügl. "Risky Decisions and the Family Firm Bias: An Experimental Study Based on Prospect Theory." Entrepreneurship Theory and Practice 43, no. 2 (September 6, 2018): 386–408. http://dx.doi.org/10.1177/1042258718796078.

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In this article, we look at how a family firm signal affects decision making of nonprofessional investors. Grounded in prospect theory and supported by empirical evidence from a choice-based experimental study ( N = 418) backed by a qualitative study, we demonstrate a behavioral bias induced by the family firm signal. This family firm bias shifts nonprofessional investors’ preferences toward the high-risk alternative in a choice situation. Accordingly, processing the family firm information seems to moderate risk aversion as risk avoidance is decreased in the gain domain, while risk seeking is reinforced in the loss domain due to trust and longevity associations tied to the family firm signal.

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Christensen, Brant E., Steven M. Glover, and Christopher J. Wolfe. "Do Critical Audit Matter Paragraphs in the Audit Report Change Nonprofessional Investors' Decision to Invest?" AUDITING: A Journal of Practice & Theory 33, no. 4 (April 1, 2014): 71–93. http://dx.doi.org/10.2308/ajpt-50793.

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SUMMARY: Both U.S. and international standard setters have recently proposed changes to the standard audit report, including a requirement to include a critical audit matter (CAM) paragraph. We examine how nonprofessional investors react to an audit report's CAM paragraph that is centered on the audit of fair value estimates. We perform an experiment with nonprofessional investors who are business school graduates who invest in individual stocks and analyze company financial data. We find that investors who receive a CAM paragraph are more likely to change their investment decision than are investors who receive a standard audit report (an information effect) or investors who receive the same CAM paragraph information in management's footnotes (a source credibility effect). We also find that the effect of a CAM paragraph is reduced when it is followed by a paragraph offering resolution of the critical audit matter. Our findings should be of interest to regulators and standard setters as they consider the feasibility of CAM paragraphs and whether and how to convey the resolution of critical audit matters.

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Dilla, William N., Diane J. Janvrin, and Cynthia Jeffrey. "The Impact of Graphical Displays of Pro Forma Earnings Information on Professional and Nonprofessional Investors' Earnings Judgments." Behavioral Research in Accounting 25, no. 1 (August 1, 2012): 37–60. http://dx.doi.org/10.2308/bria-50289.

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ABSTRACT: Regulation G (SEC 2003b) requires managers to reconcile textual non-GAAP performance measures (i.e., pro forma disclosures) to GAAP. Graphical disclosures also require reconciliation; however, neither the format nor the placement of the reconciliation is specified. We apply cognitive fit theory to argue that the influence of graphical information presentation formats is contingent on investor type and judgment complexity. Participants in our study viewed a simulated Investor Relations website for a large drug retailer and made judgments regarding current fiscal year earnings performance, earnings potential, and investment amount. We manipulated graphical (GAAP-only versus GAAP and pro forma) and textual (GAAP-only versus pro forma reconciled to GAAP) earnings disclosure content in a 2 × 2 between-participants design. We find that nonprofessional investors' current fiscal year earnings performance, earnings potential, and investment amount judgments are all influenced by graphical displays, which include pro forma as opposed to GAAP-only earnings information. Graphical displays of pro forma earnings information do not influence professional investors' current year earnings performance judgments; however, these displays do influence professional investors' earnings potential and investment amount judgments because they are more complex. Our results suggest a need to further examine the influence of graphical pro forma earnings presentation formats on investor judgments. Data Availability: Contact the first author.

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Cong, Yu, Hui Du, and Jinjuan Feng. "Does Web Syndication Technology Facilitate Investor Decision Making?" Journal of Emerging Technologies in Accounting 5, no. 1 (January 1, 2008): 143–59. http://dx.doi.org/10.2308/jeta.2008.5.1.143.

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ABSTRACT: Web syndication is an emerging technology that “feeds” website information to subscribers. It allows Internet users to collect, organize, and view frequently updated information from multiple sources effortlessly. We investigated whether using web syndication technology helps nonprofessional investors acquire and integrate relevant information which has been updated frequently and is from multiple sources when the investors make decisions. We obtained evidence of this new technology's effects using an experiment where subjects visited either a syndicated web page or a nonsyndicated web page and assessed two fictional companies' critical financial ratios and investment perspectives. Our results indicate that individuals who use syndication technology are more effective in acquiring relevant information updated frequently and integrating information for investment decision making than individuals who do not use such technology. The results suggest that web syndication may be used as an information integration tool for nonprofessional investors in assisting their decision making.

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Trinkle, Brad S., Robert E. Crossler, and France Bélanger. "Voluntary Disclosures via Social Media and the Role of Comments." Journal of Information Systems 29, no. 3 (April 1, 2015): 101–21. http://dx.doi.org/10.2308/isys-51133.

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ABSTRACT The Securities and Exchange Commission (SEC) has recently expanded the communication channels available for management when it determined that personal social media pages are recognized channels for financial disclosures, provided Reg FD and the 2008 Guidance are correctly applied. However, social media channels are more widely available to investors, both nonprofessional and sophisticated, and allow for interaction between users via postings and comments. The opinions of others, as expressed in their comments on social media, may influence investors' perception of the news in a manner that is beyond that of the traditional disclosures envisioned by the SEC. This research explores this issue by examining the influence of disclosures and attached comments via social media on nonprofessional investors' perceptions of the news, valuation judgments, and perceptions of management's credibility. Grounded in the herding and majority influence theories, the research hypotheses are tested using a between-subjects experimental design. Results indicate that the attached comments shared via social media influence the participants' perceptions and reactions to the news.

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Holt, Travis P. "An Examination of Nonprofessional Investor Perceptions of Internal and External Auditor Assurance." Behavioral Research in Accounting 31, no. 1 (September 1, 2018): 65–80. http://dx.doi.org/10.2308/bria-52276.

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ABSTRACT This study investigates whether assured disclosures of management's remediation of material weaknesses in internal controls affect positively unsophisticated investor perceptions of disclosure credibility and the likelihood of their investing in a firm. The results indicate that investors perceive assured material weakness remediation disclosures, whether the audit source is external or internal to the firm, to be more credible than unassured disclosures. Specifically, external assurance is seen to be more credible than the assurance provided by internal auditors but that is seen as more credible than no assurance. However, investment likelihood remains the same regardless of assurance source. Furthermore, the results indicate that investor disclosure credibility perceptions and investing likelihood are lower for internally assured pervasive material weakness remediation disclosures than internally assured account-specific remediations and all externally assured remediation disclosures. Finally, mediation results suggest that both internal and external auditor assurance increases investing likelihood indirectly through increased disclosure credibility.

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Sutton, Steve G., Vicky Arnold, Jean C. Bedard, and Jillian R. Phillips. "Enhancing and Structuring the MD&A to Aid Investors when Using Interactive Data." Journal of Information Systems 26, no. 2 (July 1, 2012): 167–88. http://dx.doi.org/10.2308/isys-50256.

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ABSTRACT In 2008, the SEC issued a mandate requiring the use of interactive tagged data (i.e., eXtensible Business Reporting Language, or XBRL) for all public companies' filings of their annual financial statements. However, the SEC put the mandates in place only for the financial statements and accompanying notes. The SEC specifically excluded the use of interactive tagged data for most narrative aspects of annual reports, including Management's Discussion and Analysis (MD&A), deeming current taxonomies for interactive data tagging inadequate. This study leverages upon the efforts of the Enhanced Business Reporting Consortium (EBRC) to develop a more robust taxonomy for the MD&A. The EBRC effort consists of two parts: (1) expanding the scope of qualitative disclosures, and (2) integrating all of the interactive data tags used by companies during the voluntary disclosure period predating the SEC mandate into a comprehensive set of tags for existing MD&A disclosures. Of particular interest in this research is the first aspect of the EBRC effort—an analysis of professional and nonprofessional investors' perspectives on the value of proposed qualitative disclosures and areas in which such investors would desire additional disclosures. We conducted nine focus groups with professional and nonprofessional investors to elicit their information preferences, applying procedures consistent with the “information requirements definition” phase of systems design. Results show that participants are supportive of the EBRC's proposed 31 categories of qualitative disclosures, but also identify 15 additional categories as useful. We augment the focus groups with a survey of 286 investors to assess the relative value of the combined 46 categories. All 46 items appear to be desirable across investor participants. The results have implications for ongoing efforts to expand taxonomies for qualitative data disclosure and for standard-setters considering extensions to MD&A reporting requirements. Data Availability: Contact the corresponding author.

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Pinsker, Robert, and Patrick Wheeler. "The Effects of Expanded Independent Assurance on the Use of Firm-Initiated Disclosures by Investors with Limited Business Knowledge." Journal of Information Systems 23, no. 1 (March 1, 2009): 25–49. http://dx.doi.org/10.2308/jis.2009.23.1.25.

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ABSTRACT: While increased disclosure is helpful in reducing information asymmetry, investors tend to discount firm-initiated disclosures due to the perception that management may be biased, resulting in lower stock prices. To reduce the perception of bias, assurances by independent auditors can be attached to firm disclosures not typically covered by the traditional audit. However, until recently, it was not technologically feasible to have independent assurances accompany all firm-initiated disclosures (i.e., expanded assurance). In an experimental study, we investigate whether having assurances accompany all firm disclosures will be perceived by nonprofessional investors with limited business knowledge as helpful in reducing investment risk. We use liberal arts students as proxies for these investors. Findings suggest that participants discount share prices for perceived bias in firm-initiated disclosures in the absence of independent assurance; however, in the presence of such assurance, participants significantly increase share prices. Mixed support is found for assurance reducing investor variation.

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Fanning, Kirsten, Ling Harris, Kevin E. Jackson, and Matthew T. Stern. "Investors' Responses to Reported Earnings when Management Issues Goal versus Expectation Earnings Guidance: An Experimental Investigation." Journal of Financial Reporting 4, no. 1 (March 2019): 37–57. http://dx.doi.org/10.2308/jfir-52335.

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We investigate whether nonprofessional investors' responses to a company's reported earnings differ when management earnings guidance is presented as a goal or an expectation. We present 64 M.B.A. students and 262 MTurk participants with earnings guidance, manipulating between subjects whether management provides the guidance as a “goal” or an “expectation” and whether the company's reported earnings fall short or exceed investors' expectations as derived from management's earnings guidance. Our experimental results suggest that if earnings guidance is issued as a goal rather than as an expectation, investors respond less negatively when earnings fall short of investors' expectations, but not less positively when earnings exceed investors' expectations. Mediation analysis supports the interpretation that earnings falling short of investors' expectations leads investors to perceive managers as less competent and to be more disappointed when managers issue expectation rather than goal guidance, which in turn influences investors' attractiveness judgments of the company.

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Zahller, Kimberly A., Vicky Arnold, and Robin W. Roberts. "Using CSR Disclosure Quality to Develop Social Resilience to Exogenous Shocks: A Test of Investor Perceptions." Behavioral Research in Accounting 27, no. 2 (March 1, 2015): 155–77. http://dx.doi.org/10.2308/bria-51118.

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ABSTRACT Our overarching purpose is to propose and test a theory of social resilience to exogenous shocks. The theory posits that high-quality corporate social responsibility (CSR) disclosure promotes the perception of organizational legitimacy, creating social resilience to exogenous shocks (external events outside management control). Using a path model and data from 100 experienced, nonprofessional investors, we examine whether the quality of a corporation's voluntary CSR disclosure increases its perceived organizational legitimacy and if increases in perceived legitimacy help insulate that organization from negative investor reactions following an exogenous shock. The results provide strong support for the model and show that when CSR disclosures are higher quality, investors perceive organizational legitimacy to be higher, inferring that organizations should emphasize quantifiable, consistent, and comparable reporting. Further, the results indicate that higher levels of perceived organizational legitimacy are associated with greater levels of organizational resilience to an intra-industry exogenous shock.

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Kelton, Andrea Seaton, and Uday S. Murthy. "The Effects of Information Disaggregation and Financial Statement Interactivity on Judgments and Decisions of Nonprofessional Investors." Journal of Information Systems 30, no. 3 (October 1, 2015): 99–118. http://dx.doi.org/10.2308/isys-51327.

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ABSTRACT Despite recent advances in Internet reporting technologies and calls for the increased reporting of disaggregated financial information, extant accounting research has not examined the potential positive and negative effects of providing disaggregated information using interactive web-based financial statements. In an experiment with nonprofessional investors, we investigate whether an Internet technology that provides investors control over the viewing of disaggregated financial information improves investment-related judgments and decisions and whether such effects depend on the utility of the disaggregation. In support of the notion that interactivity mitigates information overload, we find some evidence that the use of the drilldown capability is associated with a decrease in investors' perceived cognitive load. Results also show that investors using a drilldown capability are less susceptible to earnings fixation compared to investors viewing the disaggregation without the drilldown feature. However, we also find that in some circumstances financial statement disaggregation may not be beneficial to investors and that the resultant increase in cognitive load may outweigh any benefits of financial statement interactivity. These results have important and timely implications for standard setters considering whether to require increased disaggregation in financial statement reporting and companies seeking to enhance the usefulness of their web-based financial reports. JEL Classifications: C91; G11; G18; M41. Data Availability: Contact the authors.

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Riley, Jennifer, and Eileen Taylor. "The Inconsistent Effects of Plain English Disclosures on Nonprofessional Investors’ Risk Judgments." International Journal of Financial Studies 6, no. 1 (March 2, 2018): 25. http://dx.doi.org/10.3390/ijfs6010025.

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Pinsker, Robert. "Primacy or Recency? A Study of Order Effects When Nonprofessional Investors are Provided a Long Series of Disclosures." Behavioral Research in Accounting 23, no. 1 (January 1, 2011): 161–83. http://dx.doi.org/10.2308/bria.2011.23.1.161.

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ABSTRACT: Firms have the incentive to aggregate multiple pieces of good and bad news together in a consistent direction (i.e., all positive news or all negative news) and disclose it either sequentially or all together (simultaneously) in order to reduce the risk of stock price volatility or large stock price declines. Unfortunately for investors, disclosure patterns such as these may result in order effects, which reduce decision quality. My paper examines the results of three experiments in order to determine: (1) which order effect, if any, results when long series of consistent direction voluntary disclosures are made, and (2) if the sequential or simultaneous nature of the disclosures exacerbates any order effect found. The first two experiments use undergraduates as participants, while the third experiment uses actual nonprofessional investors to try and tease out explanations for the experimental findings. I find recency effects for all conditions in all experiments, and significantly greater recency effects for the sequential conditions relative to the simultaneous conditions in the 40-cue experiments. Additionally, results of the supplemental experiment provide evidence that nonprofessional investors can be information seeking and active in their investment decision-making, which can prohibit attention decrement. Findings contribute to the voluntary disclosure, judgment and decision-making (JDM), and belief revision literatures, as well as highlight the context-specific nature of the belief-adjustment model’s predictions.

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Asare, Stephen K., and Arnold M. Wright. "Inferring Remediation and Operational Risk from Material Weakness Disclosures." Behavioral Research in Accounting 29, no. 1 (August 1, 2016): 1–17. http://dx.doi.org/10.2308/bria-51560.

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ABSTRACT Understanding the inferences that nonprofessional investors draw from material weakness disclosures is important because of their effect on investment decisions and for assessing whether current standards serve their needs. Prior research shows that users assess higher financial reporting risk for an entity-level material weakness compared to an account-specific material weakness because they perceive the former as presenting a higher risk of potential misstatement. We extend the literature by proposing two variables (remediation and operational risks) that mediate and incrementally explain the observed relationship between the type of material weakness and financial reporting risk assessments. In an experiment involving 181 nonprofessional investors, we find, as predicted, that the entity-level material weakness signals not just a higher potential for undetected misstatements but also higher remediation and operational risks. Further, we find that the two variables fully mediate and incrementally explain the relationship between the type of material weakness and financial reporting risk assessments. To the extent that these variables are decision relevant, our findings suggest that regulators should reconsider and possibly reengineer the current disclosure regime that allows management to disclose unaudited information about these variables. Data Availability: Contact the authors.

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Asare, Stephen Kwaku, and Arnold M. Wright. "Investors', Auditors', and Lenders' Understanding of the Message Conveyed by the Standard Audit Report on the Financial Statements." Accounting Horizons 26, no. 2 (February 1, 2012): 193–217. http://dx.doi.org/10.2308/acch-50138.

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SYNOPSIS The purpose of this study is to evaluate the extent to which there are communication gaps among auditors and two user groups in their understanding of the messages conveyed by the standard audit report on the financial statements (SAR). Auditors, bankers, and nonprofessional investors reviewed background information on a hypothetical company that had received a SAR. Compared to auditors, users consider the SAR to be more important in assessing fraud risk even though they assess a lower likelihood that auditors have detected fraud. Further, the SAR gives users a significantly higher level of confidence in the company's management, investment soundness, and accomplishment of strategic goals than auditors. We also find several instances where the auditors and bankers differed from the nonprofessional investors in the interpretation of technical terms in the SAR, suggesting a between-user disagreement in interpreting the technical terms. Taken together, the results suggest that there are important differences between auditors and users in their understanding of the broad messages conveyed by the SAR (i.e., roles, responsibilities, and conclusions of an audit), and those differences are not driven by disagreements in interpreting the technical terms in the SAR.

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Li, Wei. "Level of business insights in the MD&A and nonprofessional investors' judgments." Accounting & Finance 57, no. 4 (February 10, 2016): 1043–69. http://dx.doi.org/10.1111/acfi.12192.

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Hewitt, Max. "Improving Investors' Forecast Accuracy when Operating Cash Flows and Accruals Are Differentially Persistent." Accounting Review 84, no. 6 (November 1, 2009): 1913–31. http://dx.doi.org/10.2308/accr.2009.84.6.1913.

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ABSTRACT: This study uses an experiment to examine (1) what factors give rise to investors' inability to fully incorporate operating cash flows and accruals into their earnings forecasts, and (2) what conditions help to improve investors' forecast accuracy when operating cash flows and accruals exhibit differential persistence. I investigate how decomposing the forecasting task and altering the presentation format combine to enable analysts and nonprofessional investors to acquire and accurately process financial statement information when operating cash flows and accruals are differentially persistent. I find that the earnings forecasts of analysts and M.B.A. students are more accurate only when participants are required to provide separate forecasts for operating cash flows and accruals and the income statement is altered to present the disaggregated cash and accrual components of earnings.

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Dilla, William, Diane Janvrin, Jon Perkins, and Robyn Raschke. "Do environmental responsibility views influence investors’ use of environmental performance and assurance information?" Sustainability Accounting, Management and Policy Journal 10, no. 3 (July 1, 2019): 476–97. http://dx.doi.org/10.1108/sampj-12-2018-0357.

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Purpose The purpose of this study is to investigate whether investor views regarding the benefits of corporate environmental responsibility moderate the influence of environmental performance and assurance information on their judgments. Specifically, the authors examine the effects of two broad views: environmental responsibility is more important than financial performance, regardless of investment returns (i.e. environmental responsibility importance) and positive environmental performance will increase investment returns (i.e. environmental performance return). Design/methodology/approach Nonprofessional investors completed an online study where environmental performance (high or low) and assurance on environmental performance information (present or absent) were varied. Participants’ corporate environmental responsibility views were assessed using a series of questions adapted from Cheah et al.’s (2011) study. Findings Environmental performance and assurance information had a greater influence on the investment judgments of investors with strong environmental responsibility views. In contrast, participants’ environmental performance return views did not moderate the influence of environmental performance and assurance information on their judgments. Supplemental analysis indicates that these contrasting results are due to the fact that the two investor views have differing influences on the relative importance that investors place on financial vs environmental performance information. Research limitations/implications This study presented participants with summarized financial and environmental performance information to maintain scale compatibility between financial and environmental measures. However, the information was presented in a format similar to those used by online brokerages. Practical implications This study suggests that financial statement preparers should consider investors’ views regarding the importance and value of environmental performance information when making decisions to disclose and obtain assurance on this information. Social implications Standard setters should consider individual differences among investors when developing guidance regarding the disclosure and assurance of environmental performance information. Originality/value There is limited prior research which examines how investors’ views of the importance of environmental performance information may influence investment judgments. This research indicates that the strength of investors’ environmental responsibility importance moderates the previously reported influence of environmental performance and assurance information on investment judgments.

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Clor-Proell, Shana M., Ryan D. Guggenmos, and Kristina Rennekamp. "Mobile Devices and Investment News Apps: The Effects of Information Release, Push Notification, and the Fear of Missing Out." Accounting Review 95, no. 5 (October 18, 2019): 95–115. http://dx.doi.org/10.2308/accr-52625.

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ABSTRACT We examine how information dissemination via mobile device applications (apps) affects nonprofessional investors' judgments. In response to the prevalence of mobile device use, the media ungroups content into smaller pieces to accommodate users, and apps use push notifications to highlight this content. These changes increase users' ability to access investment information in real time, leaving some investors feeling as if they are missing out if they are not continuously connected. We validate a scale to capture investors' fear of missing out on investment information (I-FoMO) and document that I-FoMO is distinct from traditional FoMO that occurs in social settings. Then, using an experiment, we find that receiving ungrouped content via a mobile device has a greater effect on investment allocations in the presence, rather than absence, of push notifications. Further, we find that these results hold for higher, but not for lower, I-FoMO investors. JEL Classifications: G23; M41; M48; M49. Data Availability: Contact the authors.

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Clor-Proell, Shana M., Chad A. Proell, and Terry D. Warfield. "The Effects of Presentation Salience and Measurement Subjectivity on Nonprofessional Investors' Fair Value Judgments." Contemporary Accounting Research 31, no. 1 (January 30, 2014): 45–66. http://dx.doi.org/10.1111/1911-3846.12041.

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Elkins, Hamilton, Gary Entwistle, and Regan N. Schmidt. "The influence of opportunistic capital structure disclosure in international financial reporting on nonprofessional investors." Journal of International Accounting, Auditing and Taxation 42 (March 2021): 100378. http://dx.doi.org/10.1016/j.intaccaudtax.2021.100378.

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Kelton, Andrea Seaton, and Robin R. Pennington. "Do Voluntary Disclosures Mitigate the Cybersecurity Breach Contagion Effect?" Journal of Information Systems 34, no. 3 (October 18, 2019): 133–57. http://dx.doi.org/10.2308/isys-52628.

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ABSTRACT In this study, we investigate the negative impact of a cybersecurity breach on a bystander (i.e., non-breached) firm in the same industry, referred to as investment contagion effects, and whether voluntary cybersecurity disclosures mitigate these effects. Using an experiment with nonprofessional investors, we provide strong evidence of investment contagion effects. However, we also find a portion of investor participants perceive the breach as positive news for the bystander firm, a phenomenon known as competition effects. Our evidence suggests contagion effects are dominant over competition effects, and cybersecurity disclosures provided prior to the breach announcement attenuate contagion effects. Additionally, we find cybersecurity disclosures provided subsequent to the breach announcement can reduce the magnitude of investment contagion effects. Our study informs standard setters and firms as we find some evidence that voluntary disclosures are effective in lessening investment contagion effects.

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Cheng, Mandy M., Wendy J. Green, and John Chi Wa Ko. "The Impact of Strategic Relevance and Assurance of Sustainability Indicators on Investors' Decisions." AUDITING: A Journal of Practice & Theory 34, no. 1 (February 1, 2014): 131–62. http://dx.doi.org/10.2308/ajpt-50738.

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SUMMARY In this study, we report two 2 × 2 between-subjects experiments that investigate the effect of strategic relevance of reported sustainability information and its assurance on nonprofessional investors' investment decisions. The first experiment manipulates strategic relevance of reported environmental, social, and governance (ESG) indicators between “high” and “low” by varying the company strategy (sustainability-based differentiation strategy versus cost leadership strategy unrelated to sustainability). The second experiment manipulates the strategic alignment of the ESG indicators (holding strategy constant). We also manipulate the presence (absence) of assurance in both experiments. Results from both experiments document that investors perceive ESG indicators to be more important, and are more willing to invest in the company if ESG indicators have higher strategic relevance. Experiment one also provides evidence that assurance increases investors' willingness to invest to a greater extent when ESG indicators have high relevance to the company strategy. Our findings suggest that the assurance of ESG indicators has a beneficial signaling role in communicating the importance of this reported information to investors.

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Wilson, Reginald. "The impact of revolving door practice and policy on nonprofessional investors’ perceptions of auditor independence." Accounting and Business Research 47, no. 7 (March 27, 2017): 752–79. http://dx.doi.org/10.1080/00014788.2017.1299618.

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Pennington, Robin R., and Andrea Seaton Kelton. "How much is enough? An investigation of nonprofessional investors information search and stopping rule use." International Journal of Accounting Information Systems 21 (June 2016): 47–62. http://dx.doi.org/10.1016/j.accinf.2016.04.003.

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Pinsker, Robert, Terence J. Pitre, and Ronald Daigle. "An investigation of nonprofessional investors’ qualitative materiality judgments incorporating SEC listed vs. non-listed events." Journal of Accounting and Public Policy 28, no. 5 (September 2009): 446–65. http://dx.doi.org/10.1016/j.jaccpubpol.2009.07.005.

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Basoglu, Kamile Asli, and Traci J. Hess. "Online Business Reporting: A Signaling Theory Perspective." Journal of Information Systems 28, no. 2 (April 1, 2014): 67–101. http://dx.doi.org/10.2308/isys-50780.

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ABSTRACT The reporting of business information on websites, hereafter referred to as electronic business reporting (e-BR), continues to gain widespread acceptance as the Internet provides an inexpensive channel for delivering timely financial and nonfinancial information to investors. The online environment facilitates both the delivery of traditional text-based reporting content and the use of enhanced multimedia for displaying nonfinancial content, including elements such as images, presentations, video, and social media features. Signaling theory and research on trust was applied to develop a signaling research model and investigate how the reporting of nonfinancial content in e-BR can serve as a signal, specifically with nonprofessional investors. An experimental study was conducted in which the quality of e-BR and company performance was varied to investigate how e-BR influences perceptions of investment quality and intentions. The findings suggest that the nonfinancial content in e-BR influences perceptions of trustworthiness and perceived investment quality. When financial performance is low, high-quality e-BR enhances investors' perceptions of investment quality, which in return influences investment intentions.

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Henderson., Cassy, Esperanza Huerta., and TerryAnn Glandon. "Standardizing the Presentation of Financial Data: Does XBRL’s Taxonomy Affect the Investment Performance of Nonprofessional Investors?" International Journal of Digital Accounting Research 15 (2015): 127–53. http://dx.doi.org/10.4192/1577-8517-v15_5.

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Elliott, W. Brooke, Frank D. Hodge, and Kevin E. Jackson. "The Association between Nonprofessional Investors' Information Choices and Their Portfolio Returns: The Importance of Investing Experience." Contemporary Accounting Research 25, no. 2 (June 9, 2008): 473–98. http://dx.doi.org/10.1506/car.25.2.7.

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Dilla, William N., Diane J. Janvrin, and Cynthia Jeffrey. "Pro forma accounting disclosures: The effect of reconciliations and financial reporting knowledge on nonprofessional investors' judgments." Advances in Accounting 30, no. 1 (June 2014): 43–54. http://dx.doi.org/10.1016/j.adiac.2013.12.002.

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Ceravolo, Maria Gabriella, Vincenzo Farina, Lucrezia Fattobene, Lucia Leonelli, and GianMario Raggetti. "Presentational format and financial consumers’ behaviour: an eye-tracking study." International Journal of Bank Marketing 37, no. 3 (May 7, 2019): 821–37. http://dx.doi.org/10.1108/ijbm-02-2018-0041.

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Purpose The purpose of this paper is to examine whether financial consumers are sensitive to presentational format of financial disclosure documents and whether this influences the financial attractiveness of products. Design/methodology/approach In order to observe and measure consumers’ attention, the authors exploit the unobtrusive methodology of eye tracking on a sample of nonprofessional investors, applying an ecological protocol, through a cross-sectional design. Findings The analysis reveals that financial information processing and attention distribution are influenced by the way the information is conveyed. Moreover, some layouts induce individuals to rate the products as less financially attractive, independent of the information content. This suggests the importance of studying the neural mechanisms of investors’ behaviour in the scrutiny of financial product documents. Practical implications The results lead to recommend regulators and managers to study how investors respond to financial disclosure documents by exploiting neuroscientific techniques. Moreover, there is a role for the search of any benefit coming from emphasising specific sources of information inside documents. Originality/value This research investigates the influence of presentational format on consumers’ information processing measuring the underlying neurophysiological processes; the consequent perception of financial attractiveness is also explored.

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Journal articles on the topic 'Nonprofessional investors'

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