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The Impact of Risk Report Formats on Investment Analyst Decisions: An Experimental Case from Indonesia

Author

Listed:
  • Negina Kencono Putri

    () (Accounting Department, Jenderal Soedirman University, HR. Boenyamin 708, Purwokerto, Central Java, Indonesia)

  • Triani Arofah

    (Accounting Department, Jenderal Soedirman University, HR. Boenyamin 708, Purwokerto, Central Java, Indonesia)

Abstract

This study aims to examine the impact on investment decisions of risk information reported by banking companies in Indonesia pursuant to Indonesia SFAS 60, adopted from IFRS 7. The standard requires banking companies in Indonesia to prepare a complete report (qualitative and quantitative) either in the format of a risk-sensitivity analysis, as a value at risk, or in a tabular format. This study was conducted utilising an on-line field experimental method with 3 × 2 mixed designs that involved 54 investment analysts as participants. The experiment was conducted to test whether different formats of risk information influence the investment decision-making process. The results showed that participants have confidence in making investments when the risk information presented is in a complete risk format. This is shown by a positive and significant increase in confidence when participants analyse the complete risk information compared to risk information that is presented in a qualitative form only. The findings also showed a difference when risk information is presented in a tabular format compared to risk information presented in a sensitivity analysis or a value at risk format. Most participants chose the tabular format because it is considered more informative and thought to improve the reasoning of the investment analysis.

Suggested Citation

  • Negina Kencono Putri & Triani Arofah, 2013. "The Impact of Risk Report Formats on Investment Analyst Decisions: An Experimental Case from Indonesia," Asian Academy of Management Journal of Accounting and Finance (AAMJAF), Penerbit Universiti Sains Malaysia, vol. 9(1), pages 89-112.
  • Handle: RePEc:usm:journl:aamjaf00901_89-112
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    References listed on IDEAS

    as
    1. Glenn W. Harrison & John A. List, 2004. "Field Experiments," Journal of Economic Literature, American Economic Association, vol. 42(4), pages 1009-1055, December.
    2. Mary E. Barth & Greg Clinch & Toshi Shibano, 2003. "Market Effects of Recognition and Disclosure," Journal of Accounting Research, Wiley Blackwell, vol. 41(4), pages 581-609, September.
    3. Brown Kruse, Jamie & Thompson, Mark A., 2001. "A comparison of salient rewards in experiments: money and class points," Economics Letters, Elsevier, vol. 74(1), pages 113-117, December.
    Full references (including those not matched with items on IDEAS)

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