Investor Culture and Corporate Disclosure

61 Pages Posted: 9 Mar 2020 Last revised: 2 Sep 2022

See all articles by Francois Brochet

Francois Brochet

Boston University - Department of Accounting

Heather Li

Bentley University - Department of Accountancy

Patricia L. Naranjo

Rice University

Date Written: August 26, 2022

Abstract

We examine the effect of investor culture on corporate disclosure and its capital market consequences. Because prior research shows that foreign institutions spur more long-term investment and innovation by their investees, we focus on cultural and disclosure attributes related to time and risk orientation. Using textual properties of annual reports, we first document that firms use more long-term and risk-oriented disclosures when their investor base is culturally more long-term oriented and more uncertainty-averse, respectively. We further establish a causal link using firms’ inclusion in the MSCI World Index. Lastly, we find that changes in disclosure driven by the shifting culture of the investor base decrease liquidity. Thus, it appears that investor base culture can induce disclosure-based informational frictions.

Keywords: Culture, Investor Base, Long-Term Orientation, Risk

Suggested Citation

Brochet, Francois and Li, Heather and Naranjo, Patricia L., Investor Culture and Corporate Disclosure (August 26, 2022). Available at SSRN: https://ssrn.com/abstract=3537994 or http://dx.doi.org/10.2139/ssrn.3537994

Francois Brochet

Boston University - Department of Accounting ( email )

595 Commonwealth Avenue
Boston, MA 02215
United States

Heather Li (Contact Author)

Bentley University - Department of Accountancy ( email )

175 Forest Street
Waltham, MA 02452
United States

Patricia L. Naranjo

Rice University ( email )

6100 South Main Street
McNair Hall - Room 343
Houston, TX 77005-1892
United States
7133485386 (Phone)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
161
Abstract Views
1,002
rank
258,621
PlumX Metrics