Investor response to financial news in the digital transformation era: the impact of accounting disclosures and herding behavior as indirect effect
Journal of Financial Reporting and Accounting
ISSN: 1985-2517
Article publication date: 14 November 2023
Issue publication date: 29 April 2024
Abstract
Purpose
This study aims to examine investors' reactions to bad financial news (IRBFN) based on complex financial accounting disclosures (CFAD) as well as how investors' herding behavior influences investor reactions in United Arab Emirates (UAE) project-based organizations (PBOs).
Design/methodology/approach
The primary data collection was furnished via online questionnaires, and 310 completed questionnaires were analyzed using structural equation modelling (SEM), moderation analysis, multiple regression simulations and path analysis.
Findings
The study shows that four out of the five CFAD dimensions observed – investors’ relations (IR), board and management structure, transparency disclosure and other disclosure channels – have a direct influence on investor's reactions to bad financial news, with the exception of “external auditing and audit service”. In addition, investor herding has a moderation impact on the relationship between CFAD and IRBFN.
Research limitations/implications
There is a possibility that the broad view of the results may be limited by the size of the research sample. The paper's findings should therefore be authenticated at an intercontinental level with the same conceptual framework in other nations.
Practical implications
The purpose of modeling stakeholders' decision-making process is to improve their decisions and to control their reactions that may negatively affect PBOs in the UAE.
Originality/value
This research contributes to planned behavior theory and agency theory in the UAE context, both of which are empirically tested.
Keywords
Acknowledgements
This paper is a slightly revised version of Chapters 2, 8 and 9 of the PhD thesis entitled: “The Impact of Financial Accounting Disclosures on Project-based Organizations’ Investors’ Reactions toward Financial News: The Moderating Role of Investors’ Sentiments” submitted by the first author to The British University in Dubai, March 2022) in fulfilment of the requirements for the PhD degree.
Citation
Hussain, S.M. and Alaya, A. (2024), "Investor response to financial news in the digital transformation era: the impact of accounting disclosures and herding behavior as indirect effect", Journal of Financial Reporting and Accounting, Vol. 22 No. 2, pp. 254-273. https://doi.org/10.1108/JFRA-05-2023-0287
Publisher
:Emerald Publishing Limited
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