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Level of business insights in the MD&A and nonprofessional investors' judgments

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  • Wei Li

Abstract

This study examines how the level of business insights in a firm's MD&A interacts with its current financial performance to influence nonprofessional investors' judgments. Following the observations and guidance of the ASIC and SEC to define low†and high†insight MD&A, this study finds that low†insight MD&A, when provided for a negative earnings surprise, increases investors’ judgments of the negative earnings persistence and hurts management reputation more than if no MD&A had been provided. High†insight MD&A, when including a plausible external attribution, increases investors’ judgments of management reputation in the negative earnings surprise condition and decreases investors’ judgments of positive earnings persistence.

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  • Wei Li, 2017. "Level of business insights in the MD&A and nonprofessional investors' judgments," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 57(4), pages 1043-1069, December.
    • Handle: RePEc:bla:acctfi:v:57:y:2017:i:4:p:1043-1069
    DOI: 10.1111/acfi.12192
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    References listed on IDEAS

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    1. Martin, Rachel, 2019. "Examination and implications of experimental research on investor perceptions," Journal of Accounting Literature, Elsevier, vol. 43(C), pages 145-169.

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