Individual Investors' Attention to Accounting Information: Message Board Discussions
Yale School of Management
Accounting standard setters and financial information providers are interested in individual investors’ use of accounting information, but find it difficult to assess with conventional data sources. Financial message boards provide a unique medium to analyze individuals’ attention to accounting information on a large scale and in great detail. I examine accounting-related content in 1.94 million messages for 1,852 firms and find that individual investors pay considerable attention to accounting information. In accordance with the expectation that investors react to relevant information events, I find that accounting-related discussion is significantly elevated around earnings releases, 8-K reports, quarterly reports, and annual reports of the smallest firms. I also examine whether investors expand their accounting information acquisition and processing efforts in poor information climates. I show that accounting-related discussion increases in an environment of greater uncertainty, measured by information availability (lower analyst coverage), information precision (higher analyst forecast dispersion), and information ambiguity (higher trading volume). Lastly, I propose that greater attention to accounting information may be associated with evidence of a better-informed investor. I find that higher accounting discussion around earnings announcements is associated with a reduction in information asymmetry but no evidence of a reduction in the post earnings announcement drift.
Number of Pages in PDF File: 72
Keywords: individual investors, information environment, message boards, corporate disclosures
JEL Classification: D81, D83, G14, M41working papers series
Date posted: January 24, 2010 ; Last revised: April 28, 2011
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