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

W. Brooke Elliott

University of Illinois at Urbana-Champaign

Frank D. Hodge

University of Washington - Michael G. Foster School of Business

Lisa M. Sedor

DePaul University

Date Written: July 27, 2011

Abstract

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

Elliott, W. Brooke and Hodge, Frank D. and Sedor, Lisa M., Using Online Video to Announce a Restatement: Influences on Investment Decisions and the Mediating Role of Trust (July 27, 2011). The Accounting Review, March 2012. Available at SSRN: https://ssrn.com/abstract=1467856

W. Brooke Elliott

University of Illinois at Urbana-Champaign ( email )

1206 South Sixth Street
Champaign, IL 61820
United States

Frank Douglas Hodge

University of Washington - Michael G. Foster School of Business ( email )

Paccar Hall 540, Box 353200
Seattle, WA 98195-3200
United States
206-616-8598 (Phone)
206-685-9392 (Fax)

Lisa M. Sedor (Contact Author)

DePaul University ( email )

Chicago, IL 60604
United States

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