Stephanie M. Grant

How Disclosure Medium Affects Investor Reactions to CEO Bragging, Modesty, and Humblebragging

We examine if investor expectations of two common disclosure mediums (conference calls and Twitter) interact with a CEOs communication style to influence investor judgments. Consistent with theory, results show that when the disclosure medium is a conference call, investors are less willing to invest when the CEO is modest about positive firm performance compared to when the CEO brags. In contrast, when the disclosure medium is Twitter, investors are less willing to invest when the CEO brags about positive firm performance compared to when the CEO is modest. Further analysis reveals that perceived CEO credibility mediates the influence of a CEOs communication style and disclosure medium on investor judgments. Additionally, we find that regardless of the disclosure medium, investors are less willing to invest in a firm when the CEO humblebrags about positive firm performance relative to when he brags or is modest. Our study contributes to the emerging literature on social media and disclosures, and to the literature investigating how style features of disclosures influence investor judgments. Our results also have practical implications for firms and managers developing communication strategies for new disclosure mediums like Twitter.

Trader Participation in Disclosure: Implications of Interactions with Management

Technological advances are creating a shift in the information disclosure environment allowing more investors to interact with management. We examine three key levels of trader-management interaction to assess the accuracy of traders’ market-tested value estimates and resulting market price. These data require an engaging experiment and a complex, contextually-rich asset, which we create by playing a popular gaming app before the experiment. Participants view financial information, ask management questions, estimate value, and trade. We find that receiving non-personalized question responses improves trader estimates of value and market price efficiency relative to when traders ask questions but do not expect a response. This occurs because traders exert more effort estimating value and trading. However, receiving personalized versus non-personalized responses harms value estimates and market efficiency. This occurs because traders receiving personalized responses fixate on the interaction with management, dividing their attention and diverting it away from valuing and trading the asset.

How Disclosure Features of Corporate Social Responsibility Reports Interact with Investor Numeracy to Influence Investor Judgments

Firms’ Corporate Social Responsibility (CSR) reports typically frame their strategies in terms of either community or global efforts (i.e., “strategy frame”). Further, the style used to depict CSR performance in reports often highlights either pictures or words (i.e., “presentation style”). These two prominent disclosure features of CSR reports promote a natural fit or misfit in the focus (relatively low-level or high-level focus) investors adopt when thinking about the firm and its CSR efforts. Further, these disclosure features likely have different effects on investors depending on their numeracy or, in other words, the way that they naturally process numerical information. In this study we predict and find that a fit between the strategy frame and the presentation style of a firm’s CSR report causes less numerate investors to be more willing to invest than when a fit is not present. Specifically, we find that a fit leads less numerate investors to experience subjective feelings of processing fluency and, in turn, positive affect that serves as a cue that the positive CSR performance information can be relied upon, which positively influences willingness to invest. Our results have implications for both CSR reports as well as other types of firm disclosures that increasingly vary along similar disclosure characteristics. Our results also contribute to both the growing literature on presentation effects in accounting, as well as the broader business literature on CSR reporting.

The Effect of Mobile Device Use and Headline Focus on Investor Judgments

This study conducts two experiments to examine how investors’ judgments differ when they read a press release using either a mobile device or a computer. Results show that when investors use a mobile device, information related to a specific headline (mentioning a specific part of the news like “net income�? or “revenue�?) influences their investment judgments more than when investors use a computer. This effect is robust to specific headlines that focus on either positive or negative information. In contrast, investors’ judgments do not differ when they use a mobile device compared to a computer and the headline is general (using the broad term “results�?). We replicate our findings in a second experiment and provide evidence that the observed effect occurs because investors who use their mobile device are in a more distracted frame of mind, which in turn increases the influence of prominent information. Our results suggest that managers’ presentation choices may have a greater influence on investors as they increasingly rely on mobile devices to research and execute investment decisions.

Non-GAAP Images, Press Release Prominence, and Investors’ Reliance on Non-GAAP Earnings

Firms are increasingly disseminating images on social media that display customized earnings measures (“non-GAAP images”). This practice falls outside the scope of mandatory disclosure rules on non-GAAP prominence in earnings releases and SEC filings. Using an experiment, we isolate this unexplored regulatory gap and investigate how non-GAAP images disseminated on social media and text-based prominence in hyperlinked earnings releases interact to influence investors’ reliance on non-GAAP earnings. Results indicate that, when the firm tweets an image featuring non-GAAP earnings, investors rely more on non-GAAP earnings even when GAAP earnings is prominent in a hyperlinked earnings release. Thus, a non-GAAP image tweet overrides the prominent placement of GAAP earnings in the earnings release. However, no such overriding effect occurs when non-GAAP earnings is tweeted in a plain text format. Supplemental experiments confirm that images operate as a distinctive prominence tool that differentially influences investors compared to traditional text-based prominence.