Financial Reporting and Consumer Behavior

Abstract

We show that financial reporting influences consumer behavior by drawing consumer attention to announcing firms. 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 substantial media attention, fewer concurrent announcements, heightened internet search volume, and extreme stock price jumps and earnings surprises-indicating that announcement coverage impacts 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. Consumer attention patterns increase revenues and advertising effectiveness, ultimately suggesting that financial reporting serves a marketing function.

Keywords: financial reporting, earnings announcements, media, consumers, limited attention, earnings surprise, big data JEL Classification: G10, G11, G12, G14, G40, G41

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