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The disclosure effectiveness of financial disclosure regulations to individual investors: evidence from the laboratory

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  • Paul J.M. Klumpes
  • Stuart Manson

Abstract

Nine treatments of a laboratory experiment are used to examine the disclosure effectiveness of financial risk regulation on investors' purchase decisions. The effectiveness of financial risk disclosures on investor purchase decisions is defined in terms of the observed strength of the interaction between news favourableness and information load. Information load is conditioned on whether financial risk information is presented as financial ratios, abbreviated financial reports or detailed financial statements. Disclosure effectiveness is examined both within subject (news favourableness) and between-subject (information load). Individual investors' purchase decisions are found to be sensitive to both news favourableness and information load, especially where financial risk information is disclosed as financial ratios.

Suggested Citation

  • Paul J.M. Klumpes & Stuart Manson, 2008. "The disclosure effectiveness of financial disclosure regulations to individual investors: evidence from the laboratory," International Journal of Banking, Accounting and Finance, Inderscience Enterprises Ltd, vol. 1(1), pages 47-84.
    • Handle: RePEc:ids:injbaf:v:1:y:2008:i:1:p:47-84
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