The Effect of Boilerplate Language on Nonprofessional Investors’ Judgments

Accounting and Business Research, 1-26.

Posted: 4 Nov 2021 Last revised: 8 Dec 2021

Date Written: August 16, 2021


Most companies disclose risk factors using vague, boilerplate language. Regulators are concerned that this vagueness reduces the decision-usefulness of the information; hence, they are encouraging companies to be more specific rather than generic. However, little is known about the impact of specificity on investment judgments. The results of this experimental study suggest that regulators’ concern may be justified. Non-professional investors who read a generic disclosure react less strongly immediately after reading it than those who read a more specific disclosure when prior information about the disclosed risk factor is available in their memory immediately before reading the risk disclosure. In addition, on realisation of the risk, they are more surprised than their counterparts who read a more specific disclosure, and lower their credibility judgments accordingly. These investors correct their judgments after the risk realisation to a greater extent than those who have read a more specific disclosure. The study has implications for regulators, managers, non-professional investors and researchers.

Keywords: risk disclosures, non-professional investors, specificity, investor judgment and decision making, experimental accounting

JEL Classification: M

Suggested Citation

Arikan, Ozlem, The Effect of Boilerplate Language on Nonprofessional Investors’ Judgments (August 16, 2021). Accounting and Business Research, 1-26., Available at SSRN:

Ozlem Arikan (Contact Author)

Aston Business School ( email )

Aston Triangle
Birmingham, B47ET
United Kingdom

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