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The role of retail investors in the “numbers game”: Retail investor attention and earnings management

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  • Chen, Zhongdong
  • Gao, Lei
  • Olsen, Brett

Abstract

This study uses Google Search Volume Index-based measures of retail investor attention to investigate how such attention affects managerial decisions regarding earnings management. Our results show that retail investor attention affects smaller and larger firms differently: it increases both accrual-based and real earnings management at smaller firms but reduces certain types of earnings management at larger firms. These results are consistent with attention either intensifying pressure to meet expectations or facilitating the signaling of private information in high-asymmetry environments. Consequently, retail investor attention is associated with more significant earnings surprises in smaller firms. This effect is likely driven by a greater information asymmetry in smaller firms. Results also show that while market reactions suggest retail investors incorporate certain earnings management components into valuation, their responses to different earnings management types vary by firm size and information environment.

Suggested Citation

  • Chen, Zhongdong & Gao, Lei & Olsen, Brett, 2026. "The role of retail investors in the “numbers game”: Retail investor attention and earnings management," Journal of Behavioral and Experimental Finance, Elsevier, vol. 50(C).
    • Handle: RePEc:eee:beexfi:v:50:y:2026:i:c:s2214635026000468
    DOI: 10.1016/j.jbef.2026.101184
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    Keywords

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    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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