The Impact of the Big Fish Effect on Investor Reactions to Financial and Nonfinancial Disclosure

Via two experiments, we examine how management’s flexibility in framing its numerical data affects investor judgments. In specific, we examine whether investors are susceptible to a Big Fish effect where percentage data presented as a larger percentage of a smaller subset is more desirable than percentage data presented as a smaller percentage of a larger subset, holding constant the economic value of both amounts. Our first experiment demonstrates that, after holding the information content constant, highlighting a firm’s larger sales growth in a smaller sector in press release headlines increases investors’ willingness to invest in the firm compared with highlighting the firm’s smaller sales growth in a larger sector. Our second experiment further demonstrates that framing Corporate Social Responsibility (CSR) accomplishments as larger achievements in smaller areas leads to more favorable investor perceptions about the firm’s CSR performance than framing the same accomplishments as smaller achievements in larger areas, particularly when the numerical information is presented with visual images. The findings from this study have important implications for investors, firm management, and regulators.