Repetition, Interactivity, and Investors’ Processing of Firm Disclosures

• In Event: Investor Information Processing

Abstract

Recent regulatory amendments aimed at enhancing disclosure effectiveness focus on repetition and interactivity within corporate filings, Yet, there is little empirical evidence on the effects of disclosure repetition and interactivity on investors’ decision processes. We use an experiment to address this important issue. Our results show that disclosure repetition can be beneficial as it increases investors’ weighting of repetitive information. Disclosure repetition also increases investors’ weighting of non-repetitive information but only when the disclosure is more interactive. In contrast, for less interactive disclosures, investors’ weighting of non-repetitive information actually declines in the presence of repetition. This evidence corroborates concerns that repetition can obscure important information from investors. Nonetheless, our evidence suggests that disclosure interactivity is an important presentation feature that not only mitigates the harmful effects of repetition but also improves investors’ weighting of non-repetitive information.

Authors

• Nerissa C Brown, University of Illinois at Urbana-Champaign

• Brian Gale, University of Washington

• Stephanie Grant, University of Washington