Using online video to announce a restatement: Influences on investment decisions and the mediating role of trust

W. Brooke Elliott, Frank D. Hodge, Lisa M. Sedor

Research output: Contribution to journalArticlepeer-review

Abstract

Press releases accompanying earnings restatements attempt to minimize negative reactions by explaining the reasons for the restatement. Although text-based press releases have been the norm for years, firms have recently begun using online video for such announcements. We examine the implications of doing so, and find that when a CEO accepts responsibility by making an internal attribution for a restatement, investors viewing the announcement online via video recommend larger investments in the firm than do investors viewing the announcement online via text. In contrast, when the CEO denies responsibility by making an external attribution for the restatement, investors viewing the announcement online via video recommend smaller investments in the firm than do investors viewing the announcement online via text. Our results also reveal that investor trust mediates the effect of disclosure venue and attribution on investment recommendations. These findings are important given the economic significance and trust-damaging implications of restatements, as well as the increased use of online video to make important announcements.

Original languageEnglish (US)
Pages (from-to)513-535
Number of pages23
JournalAccounting Review
Volume87
Issue number2
DOIs
StatePublished - Mar 1 2012

Keywords

  • Disclosure venue
  • Investment decisions
  • Online video
  • Restatements
  • Trust

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

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