Does concrete language in disclosures increase willingness to invest?

• 成果类型: Article
• 署名作者: Elliott, W. Brooke; Rennekamp, Kristina M.; White, Brian J.
• 署名单位: University of Illinois System; University of Illinois Urbana-Champaign; Cornell University; University of Texas System; University of Texas Austin
• 刊物名称: REVIEW OF ACCOUNTING STUDIES
• ISSN/ISSBN: 1380-6653
• DOI: 10.1007/s11142-014-9315-6
• 发表日期: 2015
• 页码: 839-865
• 关键词: home bias; psychological distance; individual investors; information-content; earnings; analysts; management; press; explanation; abstraction

摘要

As part of its push for more plain English in disclosures, the SEC argues that firms should use more concrete language to make abstract concepts clearer to investors. We use two experiments to show that, when concrete language is highlighted in a prospectus, investors are significantly more willing to invest in a firm than when abstract language is highlighted. Furthermore, we show the effect of concrete language is particularly important when investors feel more psychologically distant from a firm. Drawing on psychology theory, we predict and find that concrete language increases investors' feelings of comfort in their ability to evaluate an investment. Our study contributes to the literature on how language choices in disclosures affect investors' judgments by demonstrating that a simple, yet potentially powerful reporting tool of emphasizing concrete language may attract investors who may otherwise be reluctant to invest.