Examining The Effect of Deception Detection on Investors' Perceptions of Disclosure Credibility and Willingness to Invest.

• In Event: Investors' Perceptions of Disclosure and Disclosure Efficiency

Abstract

Recent evidence suggests that the trend of issuing video disclosures is growing and investors are exposed to the risk of including deceptive information in their decisions. This study suggests that investors can use deception detection decision aids to identify deceptive behavior in video disclosures, and that the use of such decision aids affects their perceptions of disclosure credibility and willingness to invest. The theoretical framework of this study suggests that management’s reputation affects investors’ willingness to invest through their perceptions of disclosure credibility, and that this effect is conditional on whether the decision aid detects deception. Using data from 387 nonprofessional investors, the findings suggest that deception detection dilutes the effect of management’s reputation on investors’ willingness to invest. Management’s reputation affects investors’ willingness to invest through disclosure credibility, and that effect is significantly weaker when the decision aid detects deception than when it fails to detect deception.

Author

• Anis Triki, University of Rhode Island