We examine how the ordering of information within quarterly earnings announcements influences investor response to those announcements. Specifically, we examine whether earlier discussion of earnings information, and earlier discussion of qualitatively positive or negative information, is associated with stronger responses to that information. Controlling for the linguistic content of the earnings announcement, we find a positive relation between investor response to information and the prioritization of that information in the earnings announcement. We find no evidence of investor over-reaction and, to the contrary, find some evidence that investors under-react to prioritized information. Our evidence, in conjunction with experimental evidence in Elliott (2006), suggests that information placement influences investors' responses. However, unlike the experimental evidence in Elliott (2006), our archival results suggest that investor response to information placement is warranted, rather than the result of an unintentional cognitive effect.
order of information
We conducted a clustered randomized field experiment with 20 Brazilian distributorships of a multinational direct sales organization to examine whether controlling failure perceptions through formal communications increases performance. We used the organization's weekly sales meetings to deliver a video-based message from the regional head that either communicates workers should view failure as a natural part of learning rather than an indictment of their ability (treatment condition) or simply summarizes the organization's history (control condition). We find that those who were assigned to the treatment condition were more likely to sustain their effort in response to the economic adversity that coincided with our experiment. Additional analyses suggest that our treatment accomplished this by increasing job-specific confidence and by reinforcing social norms that encourage workers to persevere after failure. Overall, our findings highlight that formal communications from senior management are a viable control mechanism for sustaining effort in the face of failure.
Contemporary Accounting Research
( Early Access)
We examine the extent to which deferred vesting of stock and option grants (deferred pay) helps firms retain executives. To the extent an executive forfeits all deferred pay if they leave the firm, deferred vesting will increase the cost (to the executive) of an early exit. The impact of deferred pay on executive retention, a key ingredient for firms to create shareholder value is hence an important empirical issue. Using pay duration proposed in Gopalan et al. (2014) as a measure of the extent of deferred equity, we find that CEOs and non-CEO executives with longer pay duration are less likely to leave the firm voluntarily. The talent retention role of deferred pay is mitigated by performance-vesting provisions and signing bonuses offered by industry peers. Moreover, we also find that voluntary turnover is less sensitive to pay duration for executives who are perceived to be more talented and have more firm-specific skills. Overall, our study highlights a strong link between compensation design and turnover of top executives. It suggests that firms take into account the need for retaining managerial talent in designing executive compensation.