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JOURNAL OF ACCOUNTING AND FINANCE
Effects of Language Vividness and Explanation Plausibility on Nonprofessional Investors’ Reactions to Earnings Warnings
Author(s): Min Chen, Amy Chun-Chia Chang
Citation: Min Chen, Amy Chun-Chia Chang, (2017) "Effects of Language Vividness and Explanation Plausibility on Nonprofessional Investors’ Reactions to Earnings Warnings", Journal of Accounting and Finance, Vol. 17, ss. 9, pp. 46-59
Article Type: Research paper
Publisher: North American Business Press
Abstract:
It is increasingly important for managers to make effective corporate disclosures to investors. This study examines investors’ reactions to two qualitative features of earnings warnings: (1) vividness of language used in warnings and (2) plausibility of explanations used to explain forecasts. By adopting a 2 2 between-subjects experimental design, the authors find that investors forecast lower future performance and judge management as more trustworthy if warnings use vivid rather than pallid language and are accompanied by plausible rather than implausible management explanations. When management explanations are implausible, investors are not significantly affected by either vivid or pallid language.
