How Do Consumers Use Firm Disclosure? Evidence from a Randomized Field Experiment

89 Pages Posted: 9 Jan 2024 Last revised: 22 Jan 2024

See all articles by Sinja Leonelli

Sinja Leonelli

New York University (NYU) - Leonard N. Stern School of Business

Maximilian Muhn

University of Chicago - Booth School of Business

Thomas Rauter

University of Chicago - Booth School of Business

Gurpal Sran

New York University (NYU) - Leonard N. Stern School of Business

Date Written: January 8, 2024

Abstract

We combine a large-scale field experiment with a customized survey to study whether and how consumers use firm disclosure. In a sample of more than 24,000 U.S. households, we first establish several stylized facts: (i) the average consumer has a moderate preference to purchase from ESG-responsible firms; (ii) consumers typically have no preference for more or less profitable firms; (iii) consumers rarely consult ESG reports and virtually never use financial reports to inform their purchase decisions. In our field experiment, we then inform households about real firm-disclosed profitability and ESG activities through seven randomized information treatments. Consumers increase their purchase intent when exogenously presented with firm-disclosed positive signals about environmental, social, and—to a lesser extent—governance activities. Full ESG reports only have an impact on consumers who choose to view them, whereas financial reports and earnings information do not have an effect. After the experiment, consumers increase their actual product purchases, but these effects are small, short-lived, and only materialize for viewed ESG reports and positive social signals. Through a follow-up survey, we provide explanations for why consumers (do not) change their shopping behavior after our information experiment.

Keywords: Consumers; Disclosure; Field Experiment; Financial Reporting; ESG Reporting; Earnings Announcements; Financial Information; Non-Financial Information

JEL Classification: C93; D12; D90; G10; M31; M41

Suggested Citation

Leonelli, Sinja and Muhn, Maximilian and Rauter, Thomas and Sran, Gurpal, How Do Consumers Use Firm Disclosure? Evidence from a Randomized Field Experiment (January 8, 2024). Chicago Booth Research Paper No. 24-02, University of Chicago, Becker Friedman Institute for Economics Working Paper No. 2024-04, Available at SSRN: https://ssrn.com/abstract=4687694 or http://dx.doi.org/10.2139/ssrn.4687694

Sinja Leonelli

New York University (NYU) - Leonard N. Stern School of Business ( email )

44 West 4th Street
Suite 9-160
New York, NY NY 10012
United States

Maximilian Muhn (Contact Author)

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

Thomas Rauter

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

Gurpal Sran

New York University (NYU) - Leonard N. Stern School of Business ( email )

44 West 4th Street
Suite 9-160
New York, NY NY 10012
United States

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
243
Abstract Views
818
Rank
225,031
PlumX Metrics