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Type: Journal article
Title: The effect of investor sophistication on the influence of nonfinancial performance indicators on investors' judgments
Author: Coram, P.
Citation: Accounting and Finance, 2010; 50(2):263-280
Publisher: Wiley
Issue Date: 2010
ISSN: 0810-5391
Statement of
Paul J. Coram
Abstract: This paper presents an experiment that examines how enhanced disclosure of nonfinancial performance indicators affects the stock-price estimates of nonprofessional and professional investors. Participants were provided with a case study containing excerpts from a hypothetical company’s annual report. The experiment was a 2 (nonprofessional and professional) × 3 (positive nonfinancial performance indicators, negative nonfinancial performance indicators, and financial information only) between-subjects design. Consistent with conservatism, the nonprofessional investors underreacted in their stock-price estimates to the positive nonfinancial disclosures, compared with professional investors with task-specific knowledge. The results from this study suggest that the value of enhanced disclosure of this type may not flow equally to all users of financial reports, if conservatism, and lack of task-specific knowledge, adversely affect their decision-making.
Keywords: Nonprofessional investors; Nonfinancial performance indicators; Conservatism; Task-specific knowledge
Rights: © The Author
RMID: 0030014542
DOI: 10.1111/j.1467-629X.2009.00328.x
Appears in Collections:Business School publications

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