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Review of Accounting Studies
Erschienen in: Review of Accounting Studies 4/2020

03.07.2020

Using video to disclose forward-looking information: the effect of nonverbal cues on investors’ judgments

verfasst von: Nicole L. Cade, Lisa Koonce, Kim I. Mendoza

Erschienen in: Review of Accounting Studies | Ausgabe 4/2020

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Abstract

We conduct two experiments to examine how investors react to nonverbal cues of certainty as displayed by a CEO communicating forward-looking information via the relatively new and emerging medium of video. Results of the first experiment suggest that, at least for the setting we examine, investors react more negatively (do not react more positively) to a video disclosure when the CEO displays nonverbal cues of uncertainty (certainty), relative to the same disclosure delivered via audio or written text. A second experiment reveals that the lack of a positive reaction to the certain CEO in the video may be due to investors’ belief that the CEO has incentives to convey certainty via nonverbal cues. Indeed, even a subsequent good-news realization—which should add credibility to the CEO’s certainty cues—does not change this perception. Our study has implications for firms considering video as a medium for disclosure.
Vorheriger Artikel Intertemporal variation in the information content of aggregate earnings and its effect on the aggregate earnings-return relation
Nächster Artikel The impact of revealing auditor partner quality: evidence from a long panel

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Fußnoten
1
Although we purposefully use a broad definition of certainty, it is nevertheless consistent with more specific definitions used in economics and psychology. For example, certainty often is defined as capturing the precision of a manager’s information (e.g., Hughes and Pae 2004) or the manager’s general level of confidence or optimism (e.g., Heaton 2002; Van den Steen 2004; Malmendier and Tate 2005; Hilary and Hsu 2011; Laux and Stocken 2012). Other definitions refer to the idea that managers appear certain because of incentives to obfuscate the truth (Beyer et al. 2010; Fischer and Stocken 2001; Fischer and Verrecchia 2000; Shin 1994; Stein 1989)—for example, to signal their ability or competence (e.g., Kanodia et al. 1989; Prendergast and Stole 1996) or to build reputation (Kreps and Wilson 1982).
 
2
In those cases where the mean results are directionally opposite to that predicted, the corresponding one-tailed p-value is greater than 0.50, reflecting the fact that the mean difference is in the opposite tail of the distribution.
 
3
We conducted a supplemental experiment to ensure that this unexpected lack of upside movement in the certain video condition did not occur because our actor’s nonverbal certainty cues went unnoticed. The results of this supplemental experiment (not tabulated) indicate that participants do notice and can discriminate between two versions of a highly certain CEO in a video disclosure, as evidenced by their judgments about the CEO’s certainty differing across the two versions. However, for both sets of video disclosures, participants again did not evaluate the firm more favorably relative to a text condition, thereby replicating the result from our primary experiment.
 
4
An alternate research design would be one in which we solicit investment judgments and attributions in the same experiment. Although this alternate design would have the benefit of correlating participants’ responses, it would be subject to the caveat that any statistically significant correlations could be explained by carryover effects (Asay et al. 2019).
 
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Metadaten
Titel
Using video to disclose forward-looking information: the effect of nonverbal cues on investors’ judgments
verfasst von
Nicole L. Cade
Lisa Koonce
Kim I. Mendoza
Publikationsdatum
03.07.2020
Verlag
Springer US
Erschienen in
Review of Accounting Studies / Ausgabe 4/2020
Print ISSN: 1380-6653
Elektronische ISSN: 1573-7136
DOI
https://doi.org/10.1007/s11142-020-09539-8

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