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

John Chi Wa Ko, Mandy M. Cheng and Wendy J. Green

European Accounting Review, 2024, vol. 33, issue 4, 1521-1548

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.

Date: 2024
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DOI: 10.1080/09638180.2023.2194666

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