Using Online Video to Announce a Restatement: Influences on Investor Trust and Investment Decisions*
49 Pages Posted: 3 Sep 2009
Date Written: September 1, 2009
Abstract
Restatements are economically significant events that damage investor trust in a firm’s financial reporting. We conduct an experiment to investigate how using online video to announce a restatement interacts with the level of responsibility a manager assumes for the restatement to influence investors’ perceptions of management’s trustworthiness and post-restatement investment decisions. We examine the use of online video for restatement disclosure due to video’s recent, explosive growth as a corporate communication tool. Our results reveal that when the CEO’s firm is the only firm restating, participants viewing the restatement announcement online via video make larger investments in the firm and are more confident in the firm’s future ability to meet analysts’ expectations than are participants who view the restatement announcement online via text. However, we do not observe this effect when the CEO’s firm and its industry peers are restating. Our results also reveal that participants’ perceptions of management’s trustworthiness mediate the influences of disclosure venue and assumed responsibility on post-restatement investment decisions. These findings are important given the dramatic increase in the number of restatements over time, the resultant deterioration of investor trust, and the Security and Exchange Commission’s recent emphasis on transitioning from traditional, paper-based to new, Internet-based disclosure venues.
Keywords: trust, investor, investment decision, responsibility, disclosure venue, online video
JEL Classification: M41, M45
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Giving Content to Investor Sentiment: The Role of Media in the Stock Market
-
More than Words: Quantifying Language to Measure Firms' Fundamentals
By Paul C. Tetlock, Maytal Saar-tsechansky, ...
-
Is All that Talk Just Noise? The Information Content of Internet Stock Message Boards
By Murray Z. Frank and Werner Antweiler
-
Media Coverage and the Cross-Section of Stock Returns
By Lily H. Fang and Joel Peress
-
When is a Liability not a Liability? Textual Analysis, Dictionaries, and 10-Ks
By Tim Loughran and Bill Mcdonald
-
Do Stock Market Investors Understand the Risk Sentiment of Corporate Annual Reports?
By Feng Li
-
Yahoo! For Amazon: Sentiment Parsing from Small Talk on the Web
By Sanjiv Ranjan Das and Mike Y. Chen
-
By Zhi Da, Joseph Engelberg, ...
-
By Joshua D. Coval and Tyler Shumway
-
The Impact of Credibility on the Pricing of Managerial Textual Content
By Elizabeth Demers and Clara Vega