Effect of narrative emphasis framing on investment propensity
Keywords:
Decision maker preferences; Emphasis framework; Accounting narratives; Graphical representations.
Abstract
Objective: This study aims to analyze the effect of the emphasis framing of accounting narratives on the user's investment propensity.
Method: We carried out an experiment with 247 students from two Higher Education Institutions in southern Brazil. We applied 5 mirrored versions of the questionnaire, modifying only the accounting narratives when framing emphasis or using graphic information. For data analysis, we used descriptive statistics and four Tobit regressions.
Originality/Relevance: The addition of scenarios with graphic representation as a way of communicating and verifying the investment propensity can be better understood by the user compared to textual elements, which is not addressed in similar studies found. The research is also relevant for verifying behavioral aspects and their influence on people's preferences and investment choices.
Results: The results show that both the adoption of narrative and graphic information reinforce the decision maker's initial decision, whether it is the propensity or not to invest in a particular company.
Theoretical/methodological/practical contributions: The study contributes by demonstrating the forms and differences of influence that the framework of emphasis has on the investment propensity. It also contributes by alerting both preparers and users of information about the potential to influence the results, through the types of emphasis framing.
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References
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Bowen, R. M., Davis, A. K., & Matsumoto, D. A. (2005). Emphasis on pro forma versus GAAP earnings in quarterly press releases: Determinants, SEC intervention, and Market reactions. The Accounting Review, 80(4), 1011-1038.
Busch, M., Schrammel, J., & Tscheligi, M. (2013, April). Personalized persuasive technology– development and validation of scales for measuring persuadability. In International Conference on Persuasive Technology (pp. 33-38). Springer, Berlin, Heidelberg.
Cesar, A. M. R. V. C., Boggio, P. S., & Campanhã, C. (2015). Neuroeconomia: uma visão geral sobre o tema. ÁVILA, F.; BIANCHI, AM Guia de economia comportamental e experimental. São Paulo: Economia Comportamental.
Chong, D., & Druckman, J. N. (2007). Framing theory. Annu. Rev. Polit. Sci., 10, 103- 126.
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DellaVigna, S., & Gentzkow, M. (2010). Persuasion: empirical evidence. Annu. Rev. Econ., 2(1), 643-669.
Dickert, S., Kleber, J., Peters, E., & Slovic, P. (2011). Numeracy as a precursor to pro- social behavior: The impact of numeracy and presentation format on the cognitive mechanisms underlying donation decisions. Judgment and Decision Making.
Dieckmann, N. F., Slovic, P., & Peters, E. M. (2009). The use of narrative evidence and explicit likelihood by decisionmakers varying in numeracy. Risk Analysis: An International Journal, 29(10), 1473-1488.
Druckman, J. N. (2001). The implications of framing effects for citizen competence. Political behavior, 23(3), 225-256.
Druckman, J. N. (2004). Political preference formation: Competition, deliberation, and the (ir) relevance of framing effects. American Political Science Review, 98(4), 671-686.
Elliott, W. B., Grant, S. M. & Rennekamp, K. M. (2017). How disclosure features of corporate social responsibility reports interact with investor numeracy to influence investor judgments. Contemporary Accounting Research 34(3): 1596-1621.
Elliott, W. B., K. M. Rennekamp, and B. J. White. (2015). Does concrete language in disclosures increase willingness to invest? Review of Accounting Studies 20(2): 839-865.
Fagerlin, A., Zikmund-Fisher, B. J., Ubel, P. A., Jankovic, A., Derry, H. A. & Smith, D. M. (2007). Measuring numeracy without a math test: Development of the Subjective Numeracy Scale (SNS). Medical Decision Making 27(5): 672-680.
Fagerlin, A., P. A. Ubel, D. M. Smith, and B. J. Zikmund-Fisher. 2007. Making numbers matter: Present and future research in risk communication. American Journal of Health Behavior 31 (Supplement 1): 47–56.
Feldman, R., Govindaraj, S., Livnat, J., & Segal, B. (2010). Management’s tone change, post earnings announcement drift and accruals. Review of Accounting Studies, 15(4), 915-953.
Friestad, M., & Wright, P. (1994). The persuasion knowledge model: How people cope with persuasion attempts. Journal of consumer research, 21(1), 1-31.
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Greene, W. H. (2008). Econometric Analysis. 6. ed. New York: Prentice Hall.
Hales, J. (2015). Discussion of “The effects of forecast type and performance-based incentives on the quality of management forecasts”. Accounting, Organizations and Society, 46, 19-22.
Han, J., & Tan, H. T. (2010). Investors' reactions to management earnings guidance: The joint effect of investment position, news valence, and guidance form. Journal of Accounting Research, 48(1), 81-104.
Haugtvedt, C. P., & Petty, R. E. (1992). Personality and persuasion: Need for cognition moderates the persistence and resistance of attitude changes. Journal of Personality and Social psychology, 63(2), 308.
Henry, E. (2008). Are investors influenced by how earnings press releases are written?. The Journal of Business Communication (1973), 45(4), 363-407.
Henry, E., & Leone, A. J. (2016). Measuring qualitative information in capital markets research: Comparison of alternative methodologies to measure disclosure tone. The Accounting Review, 91(1), 153-178.
Henry, E., & Peytcheva, M. (2018). Earnings-announcement narrative and investor judgment. Accounting Horizons, 32(3), 123-143.
İbicioğlu, H., Kocabiyik, T., & Dalğar, H. (2010). Financial statement utilization during decision making process in smes: a comparative study on european and turkish managers. Marmara University Journal of the Faculty of Economic & Administrative Sciences, 28(1).
Kahan, D. M., Peters, E., Dawson, E. C., & Slovic, P. (2017). Motivated numeracy and enlightened self-government. Behavioural Public Policy, 1(1), 54-86.
Kahneman. D. (2011) Thinking fast and slow. London. Allen Lane.
Kahneman, D. (2012). Rápido e devagar: duas formas de pensar. Tradução Cássio de Arantes Leite. Rio de Janeiro: Objetiva.
Kahneman, D., & Tversky, A. (1984). Choices, Values, and Frames. The American Psychologist, 39, 341-350.
Koonce, L., McAnally, M. L., & Mercer, M. (2005). How do investors judge the risk of financial items?. The Accounting Review, 80(1), 221-241.
Kotov, R. I., Bellman, S. B., & Watson, D. B. (2004). Multidimensional Iowa suggestibility scale (MISS).
Krische, S. D. (2015). The impact of individual investors’ financial literacy on assessments of conflicts of interest. Working paper, American University.
Loughran, T. e McDonald, B. (2011). Quando um passivo não é um passivo? Análise textual, dicionários e 10-Ks. The Journal of Finance , 66(1), 35-65.
Martins, G. D. A., & Theóphilo, C. R. (2009). Metodologia da investigação cientifica. São Paulo: Atlas, 143-164.
Maat, H. P. (2007). How promotional language in press releases is dealt with by journalists: Genre mixing or genre conflict?. The Journal of Business Communication (1973), 44(1), 59-95.
Mendonça, R. F., & Simões, P. G. (2012). Enquadramento: diferentes operacionalizações analíticas de um conceito. Revista Brasileira de Ciências Sociais, 27(79), 187-201.
Miranda, L. C., Vieira, A. S., Lagioia, U. C. T., & Vasconcelos, M. T. C (2008). Utilização de gráficos em demonstrações contábeis. Revista de Educação e Pesquisa em Contabilidade (REPeC), 2(3), 16-35.
Mortensen, T., Fisher, R., & Wines, G. (2012, December). Students as surrogates for practicing accountants: Further evidence. In Accounting Forum, 36(4), 251-265. Taylor & Francis.
Neill, A. (2001, December). The essentials of numeracy. In New Zealand Association for Research in Education (NZARE) conference, Christchurch (pp. 6-9).
O'Hare, J. (1998). The resurrection of the dodo: The unfortunate re-emergence of the puffery defense in private securities fraud actions. Ohio St. LJ, 59, 1697.
Peters, E., Hart, S. & Fraenkel, L. (2011). Informing patients: The influence of numeracy, framing, and format of side-effect information on risk perceptions. Medical Decision Making, 31(3): 432–436.
Peters, E., Västfjäll, D., Slovic, P., Mertz, C. K., Mazzocco, K., & Dickert, S. (2006). Numeracy and decision making. Psychological science, 17(5), 407-413.
Petty, R. E., & Cacioppo, J. T. (2012). Communication and persuasion: Central and peripheral routes to attitude change. Springer Science & Business Media.
Ramiah, V., Zhao, Y., Moosa, I., & Graham, M. (2016). A behavioural finance approach to working capital management. The European Journal of Finance, 22(8- 9), 662-687.
Rennekamp, K. (2012). Processing fluency and investors’ reactions to disclosure readability. Journal of Accounting Research, 50(5): 1319-1354.
Reyna, V. F., & Brainerd, C. J. (2008). Numeracy, ratio bias, and denominator neglect in judgments of risk and probability. Learning and Individual Differences, 18(1): 89–107.
Reyna, V. F., Nelson, W. L., Han, P. K., & Dieckmann, N. F. (2009). How numeracy influences risk comprehension and medical decision making. Psychological Bulletin, 135(6): 943–973.
Robu, M. A., & Robu, I. B. (2015). The influence of the audit report on the relevance of accounting information reported by listed Romanian companies. Procedia Economics and Finance, 20(1), 562-570.
Rodrigues, R., Maria, A. R., Bragança, A., Simões, S., Tomé, A., Rodrigues, D., & Heleno, B. (2015). Comunicação e percepção de risco: diferentes modos de comunicar, diferentes modos de partilhar a decisão clínica. Revista Portuguesa de Medicina Geral e Familiar, 31(2), 125- 133.
Scheufele, D. A. (2000). Agenda-setting, priming, and framing revisited: Another look at cognitive effects of political communication. Mass communication & society, 3(2-3), 297- 316.
Silva, K. D. C., Lopes, V. D. S. O., da Silva, C. A. M., D’Azevedo, R. M. P., & Guedes, K. P. (2018). Evidenciação contábil nos relatórios da administração: uma análise dos recursos visuais empregados. Revista de Iniciação Científica e Extensão, 1(Esp 4), 365-372.
Simons, R. (1999). How risky is your company? Harvard business review, 77, 85-95.
Souza, B. F.; & Nardi, P. C. C. (2018). Influência da opinião do auditor no retorno das ações das empresas brasileiras de capital aberto. Revista Contabilidade, Gestão e Governança, 21(2), 250-270.
Tan, H. T., Ying Wang, E., & Zhou, B. O. (2014). When the use of positive language backfires: The joint effect of tone, readability, and investor sophistication on earnings judgments. Journal of Accounting Research, 52(1), 273-302.
Thomas, J. (1997). Discourse in the marketplace: The making of meaning in annual reports. The Journal of Business Communication (1973), 34(1), 47-66.
Tversky, A., & Kahneman, D. (1981). The framing of decisions and the psychology of choice. science, 211(4481), 453-458.
Tversky, A., & Thaler, R. H. (1990). Anomalies: preference reversals. Journal of Economic Perspectives, 4(2), 201-211.
Vlaev, I., Stewart, N., & Chater, N. (2008). Risk preference discrepancy: A prospect relativity account of the discrepancy between risk preferences in laboratory gambles and real world investments. The Journal of Behavioral Finance, 9(3), 132- 148.
Ávila, F., & Bianchi, A. M. (Eds.). (2015). Guia de economia comportamental e experimental. Economia Comportamental. org.
Baptista, M. N., & de Campos, D. C. (2007). Metodologias de pesquisa em ciências: análises quantitativa e qualitativa. Livros Técnicos e Científicos.
Bazerman, M. H. (2014). Processo decisório. 8 ed. Rio de Janeiro: Elsevier.
Bazzotti, C., & Garcia, E. (2006). A importância do sistema de informação gerencial na gestão empresarial para tomada de decisões. Ciências Sociais Aplicadas em Revista, 6(11).
Beattie, V., & Jones, M. J. (2002). Measurement distortion of graphs in corporate reports: an experimental study. Accounting, Auditing & Accountability Journal.
Bhattacharya, N., Black, E. L., Christensen, T. E., & Mergenthaler, R. D. (2007). Who trades on pro forma earnings information?. The Accounting Review, 82(3), 581-619.
Bowen, R. M., Davis, A. K., & Matsumoto, D. A. (2005). Emphasis on pro forma versus GAAP earnings in quarterly press releases: Determinants, SEC intervention, and Market reactions. The Accounting Review, 80(4), 1011-1038.
Busch, M., Schrammel, J., & Tscheligi, M. (2013, April). Personalized persuasive technology– development and validation of scales for measuring persuadability. In International Conference on Persuasive Technology (pp. 33-38). Springer, Berlin, Heidelberg.
Cesar, A. M. R. V. C., Boggio, P. S., & Campanhã, C. (2015). Neuroeconomia: uma visão geral sobre o tema. ÁVILA, F.; BIANCHI, AM Guia de economia comportamental e experimental. São Paulo: Economia Comportamental.
Chong, D., & Druckman, J. N. (2007). Framing theory. Annu. Rev. Polit. Sci., 10, 103- 126.
Comissão de Valores Mobiliários. (1987). Parecer de orientação CVM nº 15, de 28 de dezembro de 1987. Acesso em 28 de outubro de 2019.
DellaVigna, S., & Gentzkow, M. (2010). Persuasion: empirical evidence. Annu. Rev. Econ., 2(1), 643-669.
Dickert, S., Kleber, J., Peters, E., & Slovic, P. (2011). Numeracy as a precursor to pro- social behavior: The impact of numeracy and presentation format on the cognitive mechanisms underlying donation decisions. Judgment and Decision Making.
Dieckmann, N. F., Slovic, P., & Peters, E. M. (2009). The use of narrative evidence and explicit likelihood by decisionmakers varying in numeracy. Risk Analysis: An International Journal, 29(10), 1473-1488.
Druckman, J. N. (2001). The implications of framing effects for citizen competence. Political behavior, 23(3), 225-256.
Druckman, J. N. (2004). Political preference formation: Competition, deliberation, and the (ir) relevance of framing effects. American Political Science Review, 98(4), 671-686.
Elliott, W. B., Grant, S. M. & Rennekamp, K. M. (2017). How disclosure features of corporate social responsibility reports interact with investor numeracy to influence investor judgments. Contemporary Accounting Research 34(3): 1596-1621.
Elliott, W. B., K. M. Rennekamp, and B. J. White. (2015). Does concrete language in disclosures increase willingness to invest? Review of Accounting Studies 20(2): 839-865.
Fagerlin, A., Zikmund-Fisher, B. J., Ubel, P. A., Jankovic, A., Derry, H. A. & Smith, D. M. (2007). Measuring numeracy without a math test: Development of the Subjective Numeracy Scale (SNS). Medical Decision Making 27(5): 672-680.
Fagerlin, A., P. A. Ubel, D. M. Smith, and B. J. Zikmund-Fisher. 2007. Making numbers matter: Present and future research in risk communication. American Journal of Health Behavior 31 (Supplement 1): 47–56.
Feldman, R., Govindaraj, S., Livnat, J., & Segal, B. (2010). Management’s tone change, post earnings announcement drift and accruals. Review of Accounting Studies, 15(4), 915-953.
Friestad, M., & Wright, P. (1994). The persuasion knowledge model: How people cope with persuasion attempts. Journal of consumer research, 21(1), 1-31.
Gray, D. E. (2012). Pesquisa no mundo real. trad. Roberto Costa. Porto Alegre, Penso.
Greene, W. H. (2008). Econometric Analysis. 6. ed. New York: Prentice Hall.
Hales, J. (2015). Discussion of “The effects of forecast type and performance-based incentives on the quality of management forecasts”. Accounting, Organizations and Society, 46, 19-22.
Han, J., & Tan, H. T. (2010). Investors' reactions to management earnings guidance: The joint effect of investment position, news valence, and guidance form. Journal of Accounting Research, 48(1), 81-104.
Haugtvedt, C. P., & Petty, R. E. (1992). Personality and persuasion: Need for cognition moderates the persistence and resistance of attitude changes. Journal of Personality and Social psychology, 63(2), 308.
Henry, E. (2008). Are investors influenced by how earnings press releases are written?. The Journal of Business Communication (1973), 45(4), 363-407.
Henry, E., & Leone, A. J. (2016). Measuring qualitative information in capital markets research: Comparison of alternative methodologies to measure disclosure tone. The Accounting Review, 91(1), 153-178.
Henry, E., & Peytcheva, M. (2018). Earnings-announcement narrative and investor judgment. Accounting Horizons, 32(3), 123-143.
İbicioğlu, H., Kocabiyik, T., & Dalğar, H. (2010). Financial statement utilization during decision making process in smes: a comparative study on european and turkish managers. Marmara University Journal of the Faculty of Economic & Administrative Sciences, 28(1).
Kahan, D. M., Peters, E., Dawson, E. C., & Slovic, P. (2017). Motivated numeracy and enlightened self-government. Behavioural Public Policy, 1(1), 54-86.
Kahneman. D. (2011) Thinking fast and slow. London. Allen Lane.
Kahneman, D. (2012). Rápido e devagar: duas formas de pensar. Tradução Cássio de Arantes Leite. Rio de Janeiro: Objetiva.
Kahneman, D., & Tversky, A. (1984). Choices, Values, and Frames. The American Psychologist, 39, 341-350.
Koonce, L., McAnally, M. L., & Mercer, M. (2005). How do investors judge the risk of financial items?. The Accounting Review, 80(1), 221-241.
Kotov, R. I., Bellman, S. B., & Watson, D. B. (2004). Multidimensional Iowa suggestibility scale (MISS).
Krische, S. D. (2015). The impact of individual investors’ financial literacy on assessments of conflicts of interest. Working paper, American University.
Loughran, T. e McDonald, B. (2011). Quando um passivo não é um passivo? Análise textual, dicionários e 10-Ks. The Journal of Finance , 66(1), 35-65.
Martins, G. D. A., & Theóphilo, C. R. (2009). Metodologia da investigação cientifica. São Paulo: Atlas, 143-164.
Maat, H. P. (2007). How promotional language in press releases is dealt with by journalists: Genre mixing or genre conflict?. The Journal of Business Communication (1973), 44(1), 59-95.
Mendonça, R. F., & Simões, P. G. (2012). Enquadramento: diferentes operacionalizações analíticas de um conceito. Revista Brasileira de Ciências Sociais, 27(79), 187-201.
Miranda, L. C., Vieira, A. S., Lagioia, U. C. T., & Vasconcelos, M. T. C (2008). Utilização de gráficos em demonstrações contábeis. Revista de Educação e Pesquisa em Contabilidade (REPeC), 2(3), 16-35.
Mortensen, T., Fisher, R., & Wines, G. (2012, December). Students as surrogates for practicing accountants: Further evidence. In Accounting Forum, 36(4), 251-265. Taylor & Francis.
Neill, A. (2001, December). The essentials of numeracy. In New Zealand Association for Research in Education (NZARE) conference, Christchurch (pp. 6-9).
O'Hare, J. (1998). The resurrection of the dodo: The unfortunate re-emergence of the puffery defense in private securities fraud actions. Ohio St. LJ, 59, 1697.
Peters, E., Hart, S. & Fraenkel, L. (2011). Informing patients: The influence of numeracy, framing, and format of side-effect information on risk perceptions. Medical Decision Making, 31(3): 432–436.
Peters, E., Västfjäll, D., Slovic, P., Mertz, C. K., Mazzocco, K., & Dickert, S. (2006). Numeracy and decision making. Psychological science, 17(5), 407-413.
Petty, R. E., & Cacioppo, J. T. (2012). Communication and persuasion: Central and peripheral routes to attitude change. Springer Science & Business Media.
Ramiah, V., Zhao, Y., Moosa, I., & Graham, M. (2016). A behavioural finance approach to working capital management. The European Journal of Finance, 22(8- 9), 662-687.
Rennekamp, K. (2012). Processing fluency and investors’ reactions to disclosure readability. Journal of Accounting Research, 50(5): 1319-1354.
Reyna, V. F., & Brainerd, C. J. (2008). Numeracy, ratio bias, and denominator neglect in judgments of risk and probability. Learning and Individual Differences, 18(1): 89–107.
Reyna, V. F., Nelson, W. L., Han, P. K., & Dieckmann, N. F. (2009). How numeracy influences risk comprehension and medical decision making. Psychological Bulletin, 135(6): 943–973.
Robu, M. A., & Robu, I. B. (2015). The influence of the audit report on the relevance of accounting information reported by listed Romanian companies. Procedia Economics and Finance, 20(1), 562-570.
Rodrigues, R., Maria, A. R., Bragança, A., Simões, S., Tomé, A., Rodrigues, D., & Heleno, B. (2015). Comunicação e percepção de risco: diferentes modos de comunicar, diferentes modos de partilhar a decisão clínica. Revista Portuguesa de Medicina Geral e Familiar, 31(2), 125- 133.
Scheufele, D. A. (2000). Agenda-setting, priming, and framing revisited: Another look at cognitive effects of political communication. Mass communication & society, 3(2-3), 297- 316.
Silva, K. D. C., Lopes, V. D. S. O., da Silva, C. A. M., D’Azevedo, R. M. P., & Guedes, K. P. (2018). Evidenciação contábil nos relatórios da administração: uma análise dos recursos visuais empregados. Revista de Iniciação Científica e Extensão, 1(Esp 4), 365-372.
Simons, R. (1999). How risky is your company? Harvard business review, 77, 85-95.
Souza, B. F.; & Nardi, P. C. C. (2018). Influência da opinião do auditor no retorno das ações das empresas brasileiras de capital aberto. Revista Contabilidade, Gestão e Governança, 21(2), 250-270.
Tan, H. T., Ying Wang, E., & Zhou, B. O. (2014). When the use of positive language backfires: The joint effect of tone, readability, and investor sophistication on earnings judgments. Journal of Accounting Research, 52(1), 273-302.
Thomas, J. (1997). Discourse in the marketplace: The making of meaning in annual reports. The Journal of Business Communication (1973), 34(1), 47-66.
Tversky, A., & Kahneman, D. (1981). The framing of decisions and the psychology of choice. science, 211(4481), 453-458.
Tversky, A., & Thaler, R. H. (1990). Anomalies: preference reversals. Journal of Economic Perspectives, 4(2), 201-211.
Vlaev, I., Stewart, N., & Chater, N. (2008). Risk preference discrepancy: A prospect relativity account of the discrepancy between risk preferences in laboratory gambles and real world investments. The Journal of Behavioral Finance, 9(3), 132- 148.
Published
2024-02-07
How to Cite
da Rosa, M. V., Darci, & Rengel, R. (2024). Effect of narrative emphasis framing on investment propensity . Enfoque: Reflexão Contábil, 43(1), 90-115. https://doi.org/10.4025/enfoque.v43i1.62497
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