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 with which 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 the filings of earnings releases, 8-K reports, and quarterly (annual) reports of all (the smallest) firms. I also provide significant descriptive detail on the nature of this discussion. I find that investors expand their accounting information acquisition and processing efforts in poor information climates, as evidenced by elevated discussion for firms with low analyst coverage, high analyst forecast dispersion, or high trading volume. Higher accounting discussion around the release of earnings announcements is associated with increased earnings response and somewhat reduced information asymmetry at that time, but not with reduced post-earnings-announcement drift in stock price.
Number of Pages in PDF File: 66
Keywords: individual investors, information environment, message boards, corporate disclosures
JEL Classification: D81, D83, G14, M41
Date posted: January 24, 2010 ; Last revised: July 14, 2016