TY - JOUR
T1 - Earnings-Announcement narrative and investor judgment
AU - Henry, Elaine
AU - Peytcheva, Marietta
N1 - Publisher Copyright:
© 2018, American Accounting Association. All rights reserved.
PY - 2018/9
Y1 - 2018/9
N2 - This study examines how emphasis framing in narrative disclosures, and the investor characteristics of numeracy and persuadability, affect investors’ ability to discriminate between firms’ better and worse financial performance. In an experiment with 264 participants from the general population, we manipulate emphasis framing in earnings announcement narratives as neutral, consistent, or inconsistent with the firm’s performance. We find that investors are better able to distinguish between good and poor firm performance when the accompanying disclosure emphasizes information that is consistent with the firm’s performance. Further, persuadability reduces, but numeracy increases, investors’ ability to distinguish between good and poor performance. However, our results also indicate that the inclusion of biased numerical information in narrative disclosures may have a greater negative effect on higher numerates than on lower numerates, consistent with theory suggesting that more numerate individuals tend to focus on and draw affective meaning from numbers.
AB - This study examines how emphasis framing in narrative disclosures, and the investor characteristics of numeracy and persuadability, affect investors’ ability to discriminate between firms’ better and worse financial performance. In an experiment with 264 participants from the general population, we manipulate emphasis framing in earnings announcement narratives as neutral, consistent, or inconsistent with the firm’s performance. We find that investors are better able to distinguish between good and poor firm performance when the accompanying disclosure emphasizes information that is consistent with the firm’s performance. Further, persuadability reduces, but numeracy increases, investors’ ability to distinguish between good and poor performance. However, our results also indicate that the inclusion of biased numerical information in narrative disclosures may have a greater negative effect on higher numerates than on lower numerates, consistent with theory suggesting that more numerate individuals tend to focus on and draw affective meaning from numbers.
KW - Earnings-announcement narrative
KW - Emphasis framing
KW - Framing effects
KW - Investor judgment
KW - Numeracy
KW - Persuadability
UR - http://www.scopus.com/inward/record.url?scp=85064730164&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=85064730164&partnerID=8YFLogxK
U2 - 10.2308/acch-52121
DO - 10.2308/acch-52121
M3 - Article
AN - SCOPUS:85064730164
SN - 0888-7993
VL - 32
SP - 123
EP - 143
JO - Accounting Horizons
JF - Accounting Horizons
IS - 3
ER -