Investor response to financial news in the digital transformation era: the impact of accounting disclosures and herding behavior as indirect effect

Shatha Mustafa Hussain and Amer Alaya

Journal of Financial Reporting and Accounting, 2023, vol. 22, issue 2, 254-273

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: Complex financial accounting disclosures; Bad financial news; Investors’ herding behavior; Planned behavior theory (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jfrapp:jfra-05-2023-0287

DOI: 10.1108/JFRA-05-2023-0287

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