Trader Participation in Disclosure: Implications of Interactions with Management

42 Pages Posted: 19 Jul 2017 Last revised: 3 May 2019

See all articles by W. Brooke Elliott

W. Brooke Elliott

University of Illinois at Urbana-Champaign

Stephanie M. Grant

University of Washington

Jessen L. Hobson

University of Illinois at Urbana-Champaign

Multiple version iconThere are 2 versions of this paper

Date Written: April 16, 2019

Abstract

Technological advances are creating a shift in the information disclosure environment allowing more investors to interact with management. We examine three key levels of trader-management interaction to assess the accuracy of traders’ market-tested value estimates and resulting market price. These data require an engaging experiment and a complex, contextually-rich asset, which we create by playing a popular gaming app before the experiment. Participants view financial information, ask management questions, estimate value, and trade. We find that receiving non-personalized question responses improves trader estimates of value and market price efficiency relative to when traders ask questions but do not expect a response. This occurs because traders exert more effort estimating value and trading. However, receiving personalized versus non-personalized responses harms value estimates and market efficiency. This occurs because traders receiving personalized responses fixate on the interaction with management, dividing their attention and diverting it away from valuing and trading the asset.

Keywords: social media, conference calls, investor participation, bounded rationality, information search, fundamental value, market price efficiency, laboratory markets

JEL Classification: C91, C92, G02, G14, M41

Suggested Citation

Elliott, W. Brooke and Grant, Stephanie M. and Hobson, Jessen L., Trader Participation in Disclosure: Implications of Interactions with Management (April 16, 2019). Contemporary Accounting Research, Forthcoming. Available at SSRN: https://ssrn.com/abstract=3001963 or http://dx.doi.org/10.2139/ssrn.3001963

W. Brooke Elliott

University of Illinois at Urbana-Champaign ( email )

1206 South Sixth Street
Champaign, IL 61820
United States

Stephanie M. Grant

University of Washington ( email )

Box 353200
Seattle, WA 98195-3200
United States
(206) 543-2904 (Phone)

Jessen L. Hobson (Contact Author)

University of Illinois at Urbana-Champaign ( email )

4011 Business Instructional Facility
515 East Gregory Drive
Champaign, IL 61820
United States

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