ABSTRACT: This research investigates how financial statement users' judgments and decisions are affected by the extent to which a firm's actual accounting choices match users' expectations. Based on prior communications research, I predict and find that users' credibility judgments are more extreme when a firm's actual accounting choices do not match expectations. Experiment 1 supports this prediction in a stock‐based compensation context, and Experiment 2 supports it in an accounting estimate context. Further, evidence from Experiment 1 supports the prediction that credibility judgments mediate the effect of a mismatch on investment decisions. Finally, evidence from Experiment 2 partially supports the prediction that users who encounter a mismatch between actual and expected accounting choices are more likely to search for additional information than are users who encounter a match. The results have implications for accounting researchers, regulators, and managers interested in understanding how firms' accounting choices affect users' decisions.
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1 September 2009
Research Article|
September 01 2009
The Effects of Expected and Actual Accounting Choices on Judgments and Decisions
Shana M. Clor‐Proell
Shana M. Clor‐Proell
University of Wisconsin–Madison.
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Online ISSN: 1558-7967
Print ISSN: 0001-4826
American Accounting Association
2009
The Accounting Review (2009) 84 (5): 1465–1493.
Citation
Shana M. Clor‐Proell; The Effects of Expected and Actual Accounting Choices on Judgments and Decisions. The Accounting Review 1 September 2009; 84 (5): 1465–1493. https://doi.org/10.2308/accr.2009.84.5.1465
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