Examination and implications of experimental research on investor perceptions

Abstract

This paper synthesizes existing experimental research in the area of investor perceptions and offers directions for future research. Investor-related experimental research has grown substantially, especially in the last decade, as it has made valuable contributions in establishing causal links, examining underlying process measures, and examining areas with little available data. Within this review, I examine 121 papers and identify three broad categories that affect investor perceptions: information format, investor features, and disclosure credibility. Information format describes how investors are influenced by information salience, information labeling, reporting and accounting complexity, financial statement recognition, explanatory disclosures, and proposed disclosure changes. Investor features describes investors’ use of heuristics, investor preferences, and the effect of investor experience. Disclosure credibility is influenced by external and internal assurance, management credibility, disclosure characteristics, and management incentives. Using this framework, I summarize the existing research and identify areas that would benefit from additional research.

Enhancing Activity in the Right Temporoparietal Junction Modifies the Effect of a High CEO-to-Employee Pay Ratio on the Perceived Investment Potential in the Construction Industry

“…In our study, the effects of tDCS varied based on the participants’ gender and investment experience. Previous studies have demonstrated that females are more likely to make socially responsible investments ( Tippet and Leung, 2001 ; Nilsson, 2008 ; Owen and Qian, 2008 ; Dorfleitner and Utz, 2014 ; Bauer and Smeets, 2015 ; Martin, 2019 ). This phenomenon may be partly because females have a lower perceived investment potential for a company with a low level of social responsibility (i.e., it has an unfair compensation structure), even if they have the same level of altruism as males.…”

“…It has also been found that female investors constitute the majority of socially responsible investors and are younger and more educated than conventional investors ( Tippet and Leung, 2001 ; Owen and Qian, 2008 ; Bauer and Smeets, 2015 ). Investors’ investment experience also plays an important role in affecting people’s willingness to invest ( Martin, 2019 ). Chang and Wei (2011) found that veteran investors tended to attach more importance to corporate governance information and increased the weight of such information in their investment decisions.…”

The fog index in accounting research: contributions and challenges

“…Future research can consider the following questions to address: (1) Can we identify the components of accounting narratives associated with obfuscation? For example, research could test whether the suggested words in Loughran and McDonald (2014) are more easily grasped by users of annual reports, including considering the concept of limited attention for investor types and whether readability affects certain/all investors (Martin, 2019). This will directly address disclosure obfuscation and disclosure utility by showing what investor types are affected by obfuscation and what disclosure components represent obfuscation.…”

Is Neuroaccounting Taking a Place on the Stage? A Review of the Influence of Neuroscience on Accounting Research

“…Other studies call for more research on the mental underpinnings of common cognitive biases when processing accounting information (e.g., Fehrenbacher et al, 2018;Wolfe et al, 2019). Insights into the mental underpinnings of attention to and processing of accounting information could in turn lead to research on how the design of decision aids could reduce biases and improve decision effectiveness and efficiency (Martin, 2019), especially for decision-makers without accounting expertise.…”