ABSTRACT
Research by Elliott, Rennekamp, and White (2015; hereafter, ERW) finds that highlighting concrete rather than abstract language in a disclosure can mitigate investors' local bias (i.e., the tendency to favor domestic firms headquartered closer to an investor), particularly when a firm feels more psychologically distant. This paper extends ERW to examine the effects of highlighting concrete language on home bias (i.e., the tendency to favor domestic over foreign firms), given that there are a number of information-based explanations for home bias that differ from explanations for local bias. We predict and find that highlighting concrete language in disclosures increases willingness to invest in foreign firms, consistent with the idea that home bias is driven, in part, by non-information-based psychological distance. Our paper addresses calls for more replication, provides convergent evidence on the results in ERW, and suggests a tool—highlighting concrete language—that firms can use to attract foreign investors.
Data Availability: Data are available from the authors upon request.