TWO ESSAYS ON INVESTORS' PERCEPTIONS ABOUT MANAGEMENT DISCLOSURES
In this dissertation, I describe two studies related to investors' perceptions about management disclosures. In the first study, I use a variant of Dye and Sridhar (2004) to show analytically that investor uncertainty about managers' reporting incentives to manipulate information reduces the degree to which accounting reports should weight manipulable information. I also predict and show experimentally that greater weight on manipulable information in the face of incentive uncertainty harms investor welfare more than predicted by equilibrium analyses, by hindering managers' and investors' ability to predict one another's strategies. The resulting deviations from equilibrium cause the perceived and actual value-relevance of financial reports to vary over time in predictable (and testable) ways. In the second study, I report an experiment that examines how investor affect might influence investors' perceptions of management disclosure credibility. Based on accounting and psychology literature, I predict that investors in a positive affective state will assess a higher level of management disclosure credibility due to positive interpretation and heuristic processing of information, and this tendency will be mitigated by their awareness of management reporting incentives. The results show that, inconsistent with prior evidence, positive affect does not lead to higher assessments of management disclosure credibility. Instead, positive affect is associated with a more systematic information-processing strategy. The results suggest that the psychology literature on affect need to be refined to be applied in a management disclosure setting.
Incentive Uncertainty; Relevance and Reliability Trade-off; Disclosure credibility; Investor affect; Strategic dependence
dissertation or thesis