Are Investors Influenced by the Order of Information in Earnings Press Releases?

The Accounting Review, Forthcoming https://doi.org/10.2308/TAR-2017-0478

53 Pages Posted: 12 Sep 2017 Last revised: 28 Jul 2020

See all articles by Lin Cheng

Lin Cheng

The University of Arizona - Eller College of Management

Darren T. Roulstone

Ohio State University (OSU) - Fisher College of Business

Andrew Van Buskirk

Ohio State University (OSU) - Department of Accounting & Management Information Systems

Date Written: April 22, 2020

Abstract

We examine how the ordering of information within quarterly earnings announcements influences investor response to those announcements. Specifically, we examine whether earlier discussion of earnings information, and earlier discussion of qualitatively positive or negative information, is associated with stronger responses to that information. Controlling for the linguistic content of the earnings announcement, we find a positive relation between investor response to information and the prioritization of that information in the earnings announcement. We find no evidence of investor overreaction and, to the contrary, find some evidence that investors underreact to prioritized information. Our evidence, in conjunction with experimental evidence in Elliott (2006), suggests that information placement influences investors’ responses. However, unlike the experimental evidence in Elliott (2006), our archival results suggest that investor response to information placement is warranted, rather than the result of an unintentional cognitive effect.

Keywords: earnings release, disclosure, order of information, underreaction

JEL Classification: G14, G41, M40

Suggested Citation

Cheng, Lin and Roulstone, Darren T. and Van Buskirk, Andrew, Are Investors Influenced by the Order of Information in Earnings Press Releases? (April 22, 2020). The Accounting Review, Forthcoming https://doi.org/10.2308/TAR-2017-0478, Available at SSRN: https://ssrn.com/abstract=3034761 or http://dx.doi.org/10.2139/ssrn.3034761

Lin Cheng (Contact Author)

The University of Arizona - Eller College of Management ( email )

McClelland Hall, Room 301Q
1130 E. Helen Street
Tucson, AZ 85721
United States

Darren T. Roulstone

Ohio State University (OSU) - Fisher College of Business ( email )

2100 Neil Avenue
Columbus, OH 43210-1144
United States

Andrew Van Buskirk

Ohio State University (OSU) - Department of Accounting & Management Information Systems ( email )

2100 Neil Avenue
Columbus, OH 43210
United States

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