Joint effects of boilerplate and text markup on the judgments of novice and experienced users of financial information

Elaine Henry, Marietta Peytcheva

Research output: Contribution to journalArticlepeer-review

4 Scopus citations

Abstract

We experimentally examine the effects of boilerplate disclosure and text markup on the judgments of novice and experienced users of financial information. We manipulate the presence of boilerplate (higher versus lower) and text markup (markup versus no markup) in sequential corporate disclosures, and examine participants’ sensitivity to diagnostic information about the firm’s financial performance. Using theory on the dilution effect, we predict that boilerplate will have a greater impact in the absence of markup, and markup’s positive effect on sensitivity to diagnostic information will be stronger in disclosures with higher boilerplate. Our findings are consistent with this prediction. We also find that experienced users have greater sensitivity overall to diagnostic information and that markup increases novices’ (but not experienced users’) sensitivity to diagnostic information. Our findings extend theory on potential remedies to the dilution effect and are potentially useful to regulators as they consider improving the usefulness of corporate disclosure.

Original languageEnglish
Pages (from-to)1-20
Number of pages20
JournalBehavioral Research in Accounting
Volume32
Issue number1
DOIs
StatePublished - 2020

Keywords

  • Analysts
  • Boilerplate disclosure
  • Decision aid
  • Dilution effect
  • Investor judgment
  • Nonprofessional investors

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