The Information Disclosure Strategy of Single versus Multiple Benchmarks in Earnings Announcements
Abstract
Abstract: This study is aimed to test the impact of single versus multiple benchmarks earnings information disclosure strategy towards financial users’ behavior in estimating future earnings. The study is important because it links behavioral aspects between the ways of providing and using earnings information based on multiple reference point theory of psychology. Using experimental factorial mix design 2x3x2 with 58 investor and non-investor participants, the result indicates that earnings disclosure strategy of single versus multiple benchmarks influences participant's judgments. Specifically, the multiple benchmarks are more effective than a single benchmark used to estimating future earnings. This finding is consistent with some priors studies of Schrand and Walther (2000), Krische (2005), Han and Tan (2007) and Wahyuni and Hartono (2010, 2012, 2014).
Abstract: This study is aimed to test the impact of single versus multiple benchmarks earnings information disclosure strategy towards financial users’ behavior in estimating future earnings. The study is important because it links behavioral aspects between the ways of providing and using earnings information based on multiple reference point theory of psychology. Using experimental factorial mix design 2x3x2 with 58 investor and non-investor participants, the result indicates that earnings disclosure strategy of single versus multiple benchmarks influences participant's judgments. Specifically, the multiple benchmarks are more effective than a single benchmark used to estimating future earnings. This finding is consistent with some priors studies of Schrand and Walther (2000), Krische (2005), Han and Tan (2007) and Wahyuni and Hartono (2010, 2012, 2014).
Keywords
Full Text:
PDFReferences
Ajinkya, B. B. and M. J. Gift. 1984. Corporate Managers, earnings forecasts and symmetrical adjustment of market expectations. Journal of Accounting Research. 22 (2): 425-444.
Baginski, S. P, J. M. Hassell, and M. D. Kimbrough. 2004. Why do managers explain their earnings forecasts? Journal of Accounting Research. 42(March): 1-29.
Bailey, J. 1997. Waste management shares slide after profit warning, disclosures. Wall Street Journal. 13(October): B4.
Bazerman. 1994. Judgment in managerial decision making. Willey & Sons. Inc.
Bernard, V. L. 1989. Capital markets research in accounting during the 1980's: a critical
review. The State of Accounting Research. : 72-120.
Boldt, M. N. 2001. The effects of functional fixation on relative performance evaluation. Academy of Strategic and Organizational Leadership Journal. 5 (1): 17-30
Deogun, N. 1998. Coca-Cola's net income fell by 12% as global economic crisis hurt sales. Wall Street Journal. 16(October): A4.
Easton, P. and M. Zmijewski. 1989. Cross-sectional variation in the stock market response to accounting earnings announcements. Journal of Accounting and Economics. 11: 117-141.
Fiegenbaum, A. and H. Thomas. 1988. Attitudes toward risk and the risk-return paradox: prospect theory explanations. Academy of Management Journal. 31: 85-106.
________, S. Hart, and D. Schendel. 1996. Strategic reference point theory. Strategic Management Journal. 17: 219-235.
Foster, G. 1977. Quarterly accounting data: Time-series properties and predictive-ability results. The Accounting Review. 52: 1-21.
Freeman, R. and S. Tse. 1992. A nonlinear model of security price responses to unexpected earnings. Journal of Accounting Research. 30: 185-209.
Han, Jun. and H. Tan. 2007. Investors ‘Reactions to Management Guidance Forms: The Influence of Multiple Benchmarks. The Accounting Review. 82(2): 521-543.
Hartono, Jogiyanto. 2004. How, why and when investors revise their beliefs to company information and their implications to firms announcement policy. ANDI Yogyakarta.
______, J. and S. Wahyuni. 2014. Implementation of multiple reference point theory in management guidance information disclosure. Unpublished
Hayn, C. 1995. The information content of losses. Journal of Accounting and Economic. 20: 125-153.
Helson, H. 1964. Adaptation Level Theory: An Experimental and Systematic Approach to Behavior. New York, NY: Harper & Row.
Kahneman, D. and A. Tversky. 1979. Prospect theory: an analysis of decision under risk. Econometrica. 47(March): 263-291.
Kormendi, R. and R. Lipe. 1987. Earnings innovations, earnings persistence, and stock return. Journal of Business. 60: 323-345.
Krische, S. D. 2005. Investor’evaluations of strategic prior-period benchmark disclosure in earnings announcements. The Accounting Review. 80(1): 243-268.
Lowenstein, R. 1997. Sipping the fizzing Coca-Cola's profits. Wall Street Journal (May 1) CI.
Moeckel, Cindy. 1990. The effect of experience on auditor’s memory errors. Journal of Accounting Research. 28(2): 368-387.
Ordones, Lisa D., T. Connolly, and R. Coughlan. 2000. Multiple reference points in satisfaction and fairness assessment. Journal of Behavioral Decision Making. 13: 329-344.
Pattel, J. 1976. Corporate forecasts of earnings per share and stock price behavior: Empirical tests. Journal of Accounting Research. (Autumn): 246-276.
Penman, S. 1980. An empirical investigation of the voluntary disclosure of corporate earnings forecasts. Journal of Accounting Research. (Spring): 132-160.
Schrand, C. M. and B. R. Walther. 2000. Strategic benchmarks in earnings announcements: The selective disclosure of prior-period earnings components. The Accounting Review. 75 (2): 151-177.
Thibaut, J. W., and H. H. Kelly. 1959. The Social Psychology of groups. New York, NY: Willey.
Tversky, A. 1972. Elimination by aspects: A theory of choice. Psychological Review. 79(4): 281-299.
_______. and D. Kahneman. 1974. Judgment under uncertainty: heuristics and biases. Science. 185: 1124-1131.
Wahyuni, S. and J. Hartono. 2010. Strategic disclosure of multiple benchmarks in earnings announcements: An examination of investor behavior based on internal and external
factors in the performance evaluation. The Indonesian Journal of Accounting Research. 13(Mei): 149-166.
________, and J. Hartono. 2012. Reminder effect and anchoring-adjustment in earnings announcement. Implementation of prior-period benchmark disclosure strategy. Journal Of Indonesian Economy & Business. 27 (September): 390-405.
Waymire, G. 1984. Additional evidence on the information content of management earnings forecast. Journal of Accounting Research. (Autumn): 703-718.
DOI: http://doi.org/10.33312/ijar.377
Refbacks
- There are currently no refbacks.
-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
The Indonesian Journal of Accounting Research (IJAR)
Ikatan Akuntan Indonesia
Graha Akuntan, Jl. Sindanglaya No.1 Menteng, Jakarta Pusat 10310
Editorial Secretariat
CP : Farinza
Phone : +62 812-2848-2829
Fax : +62 274 524606
Website: http://ijar-iaikapd.or.id/
Email : sekretariat@ijar-iaikapd.or.id
Marketing and Sales Office
CP : Reza Fauzi
Divisi Pelayanan, Keanggotaan dan Mitra IAI.
Grha Akuntan, Jl. Sindanglaya No.1, Menteng.
Telp.021-31904232 Ext.324/321
-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
ISSN 2086-6887 (Print)ISSN 2655 - 1748 (online)
-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------