Using Online Video to Announce a Restatement: Influences on Investment Decisions and the Mediating Role of Trust
The Accounting Review, March 2012
40 Pages Posted: 5 Sep 2009 Last revised: 1 Aug 2011
Date Written: July 27, 2011
Press releases accompanying earnings restatements attempt to minimize negative reactions by explaining the reasons for the restatement. Although text-based press releases have been the norm for years, firms have recently begun using online video for such announcements. We examine the implications of doing so, and find that when a CEO accepts responsibility by making an internal attribution for a restatement, investors viewing the announcement online via video recommend larger investments in the firm than do investors viewing the announcement online via text. In contrast, when the CEO denies responsibility by making an external attribution for the restatement, investors viewing the announcement online via video recommend smaller investments in the firm than do investors viewing the announcement online via text. Our results also reveal that investor trust mediates the effect of disclosure venue and attribution on investment recommendations. These findings are important given the economic significance and trust-damaging implications of restatements, as well as the increased use of online video to make important announcements.
Keywords: trust, investor, investment decision, responsibility, disclosure venue, online video
JEL Classification: M40, M41, M43
Suggested Citation: Suggested Citation