The Effects of Expected and Actual Accounting Choices on Judgments and Decisions

The Accounting Review, Vol. 84, No. 5, pp. 1465-1494, September 2009

49 Pages Posted: 21 Mar 2010

See all articles by Shana Clor-Proell

Shana Clor-Proell

Texas Christian University - Department of Accounting

Date Written: September 2009

Abstract

This research investigates how financial statement users’ judgments and decisions are affected by the extent to which a firm’s actual accounting choices match users’ expectations. Based on prior communications research, I predict and find that users’ credibility judgments are more extreme when a firm’s actual accounting choices do not match expectations. Experiment 1 supports this prediction in a stock-based compensation context, and Experiment 2 supports it in an accounting estimate context. Further, evidence from Experiment 1 supports the prediction that credibility judgments mediate the effect of a mismatch on investment decisions. Finally, evidence from Experiment 2 partially supports the prediction that users who encounter a mismatch between actual and expected accounting choices are more likely to search for additional information than are users who encounter a match. The results have implications for accounting researchers, regulators, and managers interested in understanding how firms’ accounting choices affect users’ decisions.

Keywords: accounting choices, accounting estimates, expectancy violations theory, stock-based compensation

Suggested Citation

Clor-Proell, Shana, The Effects of Expected and Actual Accounting Choices on Judgments and Decisions (September 2009). The Accounting Review, Vol. 84, No. 5, pp. 1465-1494, September 2009, Available at SSRN: https://ssrn.com/abstract=1571460 or http://dx.doi.org/10.2139/ssrn.1571460

Shana Clor-Proell (Contact Author)

Texas Christian University - Department of Accounting ( email )

M.J. Neeley School of Business
TCU Box 298530
Fort Worth, TX 76129
United States

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