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Chinese versus U.S. Investors' Reactions to Accounting Narratives: An Experiment

Sat, April 29, 11:15am to 12:30pm, Hilton Miami Downtown, TBA

Abstract

This paper examines whether investor reactions to accounting narratives are uniform across cultures or if there are predictable, systematic culture-based differences, particularly for investors from interdependent cultures, such as Asia. Research from social psychology suggests that interdependent cultures (relative to independent cultures) have a familiarity with and preference for concrete language, based on the prevalence of its use in person description and attribution in these cultures, so the reactions to accounting narratives by “Western” investors (as observed in Riley, Semin, and Yen [2014]) might not apply for interdependent culture investors (from Asia). To answer this question, this paper builds on the experiment conducted in Riley et al. (2014) by collecting data from investors from an interdependent culture (i.e., China) and comparing their investment judgments to the “baseline” judgments of the U.S. investors from Riley et al. (2014) and finds results consistent with predictions. These results have implications for investor relations professionals, international standard-setting bodies, and researchers.

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