Financial Reporting and Consumer Behavior

Abstract

We show that financial reporting influences consumer behavior by showcasing firms’ brand names and financial information. Analyzing GPS data, we document upticks in foot-traffic to firms’ commercial locations immediately following their earnings announcements. This increase is more pronounced for announcements with extreme surprises, substantial media coverage, and heightened internet search volume—implying that announcement coverage drives consumer behavior by capturing attention. Furthermore, foot-traffic increases with positive earnings for firms offering durable goods, suggesting consumers respond to news about firms’ financial prospects. These patterns generate feedback effects on revenue and advertising effectiveness, ultimately suggesting that financial reporting serves a marketing function.

Keywords: financial reporting, earnings announcement, consumers, limited attention, consumer demographics, earnings surprise, big data

JEL Classification: G10, G11, G12, G14, G40, G41