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Stakeholder Focus or Strategy Focus? An Eye-Tracker Study on the Effect of Presentation Format on Nonprofessional Investors’ Information Processing Patterns

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  • John Chi Wa Ko
  • Mandy M. Cheng
  • Wendy J. Green

Abstract

Using eye-tracking technology, we examine whether the information processing patterns of nonprofessional investors with a directional investment preference are affected by performance information presented based on either a focus on stakeholders (stakeholder format) or on strategic goals (strategic theme format). We find that when a company’s financial performance has declined but nonfinancial performance has improved, a strategic theme (stakeholder) format causes investors in a long investment position to focus on negative financial information to a lesser (greater) extent than those in a short investment position. These results indicate that a strategic theme format encourages biased investors to draw on favorable nonfinancial information to support their position, whereas a stakeholder format causes them to closely scrutinize unfavorable financial information. We also find that the level of bias in investors’ earnings forecasts is lower when information is presented in a strategic theme format than in a stakeholder format; however, a supplementary experiment finds that this result is reversed when a company’s financial performance has improved but its nonfinancial performance has declined. Our results have implications for external report preparers, standard setters, and analysts.

Suggested Citation

  • John Chi Wa Ko & Mandy M. Cheng & Wendy J. Green, 2024. "Stakeholder Focus or Strategy Focus? An Eye-Tracker Study on the Effect of Presentation Format on Nonprofessional Investors’ Information Processing Patterns," European Accounting Review, Taylor & Francis Journals, vol. 33(4), pages 1521-1548, August.
  • Handle: RePEc:taf:euract:v:33:y:2024:i:4:p:1521-1548
    DOI: 10.1080/09638180.2023.2194666
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