The Effects of Interactivity on User Perceptions of Credibility and Investment Choice

• In Event: Interactive Technology

Abstract

This study investigates the effects of interactivity on perceived forecast credibility and a firm’s attractiveness as a potential investment. The concept of interactivity in financial reporting on the web has become prevalent in recent years due to the development of new interactive technologies, and initiatives directed by the Securities and Exchange Commission (SEC). However, we have very little knowledge of the impact of interactivity on decision making in a financial reporting context. The existing literature on disclosure credibility suggests that investor credibility assessments of management disclosures are influenced by the venue of disclosure. Previous research suggests that increasing interactivity has a positive impact on investor perceptions of credibility and investment choices but the process through which this occurs is uncertain. This study employs the elaboration likelihood model (ELM) to understand the interactivity concept and its impact on information processing and belief/attitude formation. An experiment is conducted where the level of interactivity and the strength of disclosure communication (argument quality) are manipulated. Individual perceptions of the level of interactivity and argument quality are measured and examined to determine their impact on credibility perceptions and the investment decision. The results suggest that nonprofessional investors are influenced by both the perceptions of the argument quality of management’s earnings forecast and their perceptions of interactivity. Both perceived argument quality and perceived interactivity had positive effects on disclosure credibility. This suggests that both interactivity and management’s earnings forecast can be used as an influencing tool for nonprofessional investors. However, the results also indicate that perceived argument quality has a stronger impact on actual investment behavior than perceived interactivity, suggesting that investor perceptions of the quality of information contained in management’s disclosures has a greater impact on actual behavior.

Authors

• Oluwakemi Ajayi, University of Colorado Denver

• Tanya L Benford, Florida Gulf Coast University