Does concrete language in disclosures increase willingness to invest?

Does concrete language in disclosures increase willingness to invest? As part of its push for more plain English in disclosures, the SEC argues that firms should use more concrete language to make abstract concepts clearer to investors. We use two experiments to show that, when concrete language is highlighted in a prospectus, investors are significantly more willing to invest in a firm than when abstract language is highlighted. Furthermore, we show the effect of concrete language is particularly important when investors feel more psychologically distant from a firm. Drawing on psychology theory, we predict and find that concrete language increases investors’ feelings of comfort in their ability to evaluate an investment. Our study contributes to the literature on how language choices in disclosures affect investors’ judgments by demonstrating that a simple, yet potentially powerful reporting tool of emphasizing concrete language may attract investors who may otherwise be reluctant to invest. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Accounting Studies Springer Journals

Does concrete language in disclosures increase willingness to invest?

Loading next page...
 
/lp/springer_journal/does-concrete-language-in-disclosures-increase-willingness-to-invest-vq7PV2eiKy
Publisher
Springer US
Copyright
Copyright © 2014 by Springer Science+Business Media New York
Subject
Economics / Management Science; Accounting/Auditing; Finance/Investment/Banking; Public Finance & Economics
ISSN
1380-6653
eISSN
1573-7136
D.O.I.
10.1007/s11142-014-9315-6
Publisher site
See Article on Publisher Site

Abstract

As part of its push for more plain English in disclosures, the SEC argues that firms should use more concrete language to make abstract concepts clearer to investors. We use two experiments to show that, when concrete language is highlighted in a prospectus, investors are significantly more willing to invest in a firm than when abstract language is highlighted. Furthermore, we show the effect of concrete language is particularly important when investors feel more psychologically distant from a firm. Drawing on psychology theory, we predict and find that concrete language increases investors’ feelings of comfort in their ability to evaluate an investment. Our study contributes to the literature on how language choices in disclosures affect investors’ judgments by demonstrating that a simple, yet potentially powerful reporting tool of emphasizing concrete language may attract investors who may otherwise be reluctant to invest.

Journal

Review of Accounting StudiesSpringer Journals

Published: Dec 2, 2014

References

  • A review of the empirical disclosure literature: A discussion
    Core, J
  • Beyond the numbers: Measuring the information content of earnings press release language
    Davis, A; Piger, J; Sedor, L
  • Managers use of language across alternative disclosure outlets: Earnings press releases versus MD&A
    Davis, A; Tama-Sweet, I
  • By their words ye shall know them: Language abstraction and the likeability of describers
    Douglas, K; Sutton, R
  • How disaggregation enhances the credibility of management earnings forecasts
    Hirst, DE; Koonce, L; Venkataraman, S
  • Familiarity breeds investment
    Huberman, G
  • The role of supplementary statements with management earnings forecasts
    Hutton, AP; Miller, GS; Skinner, DJ
  • Local does as local is: Information content of the geography of individual investors common stock investments
    Ivković, Z; Weisbenner, S
  • Why is there a home bias? An analysis of foreign portfolio equity ownership in Japan
    Kang, J; Stulz, R

You’re reading a free preview. Subscribe to read the entire article.


DeepDyve is your
personal research library

It’s your single place to instantly
discover and read the research
that matters to you.

Enjoy affordable access to
over 12 million articles from more than
10,000 peer-reviewed journals.

All for just $49/month

Explore the DeepDyve Library

Unlimited reading

Read as many articles as you need. Full articles with original layout, charts and figures. Read online, from anywhere.

Stay up to date

Keep up with your field with Personalized Recommendations and Follow Journals to get automatic updates.

Organize your research

It’s easy to organize your research with our built-in tools.

Your journals are on DeepDyve

Read from thousands of the leading scholarly journals from SpringerNature, Elsevier, Wiley-Blackwell, Oxford University Press and more.

All the latest content is available, no embargo periods.

See the journals in your area

Monthly Plan

  • Read unlimited articles
  • Personalized recommendations
  • No expiration
  • Print 20 pages per month
  • 20% off on PDF purchases
  • Organize your research
  • Get updates on your journals and topic searches

$49/month

Start Free Trial

14-day Free Trial

Best Deal — 39% off

Annual Plan

  • All the features of the Professional Plan, but for 39% off!
  • Billed annually
  • No expiration
  • For the normal price of 10 articles elsewhere, you get one full year of unlimited access to articles.

$588

$360/year

billed annually
Start Free Trial

14-day Free Trial