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Trader Participation in Disclosure: Implications of Interactions with Management†

Author

Listed:
  • W. Brooke Elliott
  • Stephanie M. Grant
  • Jessen L. Hobson
  • Scott Asay

Abstract

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. Participation des opérateurs à la communication d'information : incidence des interactions avec la direction Les progrès technologiques modifient le contexte de la communication d'information en permettant à un plus grand nombre d'investisseurs d'interagir avec la direction. Les auteurs étudient trois niveaux principaux d'interaction entre les opérateurs et la direction, afin d'évaluer l'exactitude des estimations de valeur des opérateurs, testées par rapport au marché, et l'efficience des cours de marché qui en résultent. L'analyze de ces données nécessite une expérience attractive et un actif présentant suffisamment de complexité et de richesse contextuelle, actif que créent les auteurs à l'aide d'une populaire application de jeu préalablement à l'expérience. Les participants voient l'information financière, posent des questions à la direction, estiment la valeur et négocient. Les auteurs constatent que les estimations de valeur des opérateurs et l'efficience des cours de marché sont meilleures lorsque les opérateurs obtiennent des réponses non personnalisées à leurs questions que lorsqu'ils posent des questions sans attendre de réponse. Cela tient au fait que les opérateurs déploient davantage d'effort pour estimer la valeur et négocier. Toutefois, l'obtention de réponses personnalisées, par rapport à celle de réponses non personnalisées, nuit aux estimations de valeur et à l'efficience du marché, du fait que les opérateurs qui obtiennent des réponses personnalisées s'attachent à l'interaction avec la direction, ce qui les distrait et détourne leur attention de l'estimation de la valeur de l'actif et de la négociation.

Suggested Citation

  • W. Brooke Elliott & Stephanie M. Grant & Jessen L. Hobson & Scott Asay, 2020. "Trader Participation in Disclosure: Implications of Interactions with Management†," Contemporary Accounting Research, John Wiley & Sons, vol. 37(1), pages 68-100, March.
    • Handle: RePEc:wly:coacre:v:37:y:2020:i:1:p:68-100
    DOI: 10.1111/1911-3846.12524
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    References listed on IDEAS

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    1. Libby, Robert & Bloomfield, Robert & Nelson, Mark W., 2002. "Experimental research in financial accounting," Accounting, Organizations and Society, Elsevier, vol. 27(8), pages 775-810, November.
    2. Hales, Jeffrey, 2009. "Are investors really willing to agree to disagree? An experimental investigation of how disagreement and attention to disagreement affect trading behavior," Organizational Behavior and Human Decision Processes, Elsevier, vol. 108(2), pages 230-241, March.
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    5. Jing Zhu & Chen Zhang & Jingsong Zhao & Yuanpu Ji & Wenjun Wang, 2024. "The impact of declarative and interactive carbon disclosure on firm value: complements or substitutes?," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 26(5), pages 13375-13409, May.
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    10. Xu, Shengxiang & Chen, Hsinghung & Dong, Shuli & Guo, Zizheng, 2023. "Can upgrading information infrastructure improve the innovation ability of companies? Empirical evidence from China," Telecommunications Policy, Elsevier, vol. 47(6).
    11. Yuming Zhang & Fan Yang, 2021. "Corporate Social Responsibility Disclosure: Responding to Investors’ Criticism on Social Media," IJERPH, MDPI, vol. 18(14), pages 1-27, July.
    12. Shibo Bian & Iftekhar Hasan & Xunxiao Wang & Zhipeng Yan, 2024. "Do markets value manager-investor interaction quality? Evidence from IPO returns," Review of Quantitative Finance and Accounting, Springer, vol. 63(2), pages 599-632, August.
    13. Wei Deng & Jing Shao, 2022. "Empowering Green Development: How Social Media Interaction Influences Environmental Information Disclosure of High-Polluting Firms," IJERPH, MDPI, vol. 19(16), pages 1-20, August.
    14. Zhu, Jing & Zhang, Chen & Zhao, Jingsong & Sun, Jiaojiao, 2024. "The impact of digital carbon communication on market response to carbon disclosure: The moderating effects of external supervision," Finance Research Letters, Elsevier, vol. 67(PB).

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